legal controls on exports of potentially strategic technology

8/14/2019 Legal Controls on Exports of Potentially Strategic Technology

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LEGAL CONTROLS ON EXPORTS OF POTENTIALLY STRATEGIC TECHNOLOGY:-

A STANDARD OF NATIONAL SECURITY IN U.S. EXPORT LEGISLATION

INTRODUCTION

(a) A General Overview of Transfer of Technology

(b) Legal Regulations in Strategic Technology Transfer

Security Based Export Controls

(c) Concerted Multilateral Legislative Activity to Prevent

Unauthorized Technology Exports

(d) "Right to Export" versus National Security & Foreign Policy

EXISTING TECHNOLOGY EXPORT CONTROLS:-

(a) Multilateral High Technology Export Controls by CoCom

(b) Technology Exports in Concord with U.S. Foreign Policy

and National security

(c) Enactment of Export Administration Act

Procedure of Export Control under Export Administration

Act

Criteria Germane to Export Control :

Restrictions based on Foreign Policy

JURISDICTIONAL ISSUES IN TECHNOLOGY EXPORTS

Extraterritorial Implications of Export Controls

a) Influence of Export Controls on Foreign Law

(b) Compelling necessity of Export Controls in Potentially

Strategic Technology Transfers

(c) Domestic Implications:- Proposals to relax clamps on

Reexports

CONCLUSION

Visualizations of Technology Transfer/Export Controlsin the future

By : Divyang K. Chhaya

LEGAL CONTROLS ON EXPORTS OF POTENTIALLY STRATEGIC TECHNOLOGY :-


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A STANDARD OF NATIONAL SECURITY IN U.S. LEGISLATION

Introduction

General Overview of Transfer of Technology

Technology is suitably defined by the United Nations Conference

on Trade & Development (UNCTAD)[1]. Technology is mainly

considered as an essential input for production and is trans-

ferred or sold as:-(i) Capital goods, including machinery, and

productive systems, (ii) Human labour, usually skilled manpower

and management, specialized scientists, and (iii) Information of

both technical and a commercial nature, including that which is

readily available, and that which is subject to proprietary

rights and restrictions.

The Least developed Countries (LDC) are generally deficient in

all three domains, as most LDC's have to import almost all forms

of technology. LDC's may indeed even lose to the developed

countries, through brain drain, their specialists who may be

underemployed or their talents not utilized or employed at

all(India is the best example theretofore).

Contreras[2]lists various other definitions of technology,

i.e.:-(1) Amilcar Herrera:[3]"Technology may be defined as a set

of instruments or tools, materials, know-how and abilities which

are used to satisfy the community needs and to increase its

control over the environment."

(2) Jorge Sabato:[4] "...the ordered set of skills which is

applied in the production and marketing of goods and services,

and which is integrated not only by scientific knowledge i.e.


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coming from the natural, social or human sciences,.... but also

by empirical knowledge stemming from observations, experiences,

certain liabilities and traditions."

(3) Ignacy Sachs [5] "Organized knowledge for production...."

Apart from the above many other definitions of technology have

come into existence spelling out the concept looking at its

differing perspectives. It is evident that most definitions have

in common certain elements detailed hereunder:-

(i) that technology has multiple parameters i.e. man,

management, machines and knowledge, (ii) that technology is

linked with scientific activity, (iii) that technology is

productive when organized effectively.

Technology required in industrial projects usually includes the

basic elements thereof such as :-[6]

(a) feasibility studies, market surveys, and other preinvestment

services, (b) determination of the range of technologies and

choice of technology, (c) industrial process, including

machinery, (d) engineering design and detached engineering, (e)

plant construction and installation of machinery, (f) training

of technical and managerial personnel, (g) management and

operation of production facilities, (h) marketing information,

and (i) improvements in process and product designs.

Therefore, when one addresses the topic of technology transfer

and development (TTD) one refers to a set of capabilities and

activities which have been associated with Multinational

Enterprise's present area of competence[7]. In order to achieve

multiplicity of final applications it is necessary to search for

universal products. As we have seen for micro-processors/carbon

fibers , among many others, their intrinsic qualities allow them

to be utilized in many other ways resulting in end products

which are more or less universal in nature, many times designed

with no particular or specific use in mind. Therefore, univer-


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sality leads to standardization which at first seems to be in

direct contradiction to customization[8]. By technology transfer

(e.g.,in Japanese electronic industry) various elements are

articulated in a way that allows several forms and final

destinations. Thus, from identical parts, distinct customized

end products can be obtained. The bunching of technologies is

mirrored by a bunching of universal components.Technology in the

form of products, must reach the consumer in the market place if

the gains from the commercialization thereof are to be realized.

Strategies for technology bunching permit the valorization of

technological assets. Many countries have little or no restric-

tions in transfer of consumer goods technology and franchises

pertaining to food, soft drinks etc., but the developed world

is extremely conscious about strategic technology exports or

transfer of militarily critical technology. This paper shall

discuss the role of such export controls enacted for restricting

exports and reexports of potentially strategic technology by the

United States, basically to further its foreign policy goals and

objectives of national security. Legally, the transfer of

technology requires very specific considerations; it is a

contract agreement for a specified purpose, involving a peculiar

type of property and entailing certain special obligations not

generally found relevant to contractual transactions. Such a

property is called intellectual property[9]. In any internation-

al transfer of technology transaction various national and


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international laws come into effect,. These laws[10] are a

result of a commitment to develop the knowledge which is a

common heritage of mankind.

LEGAL REGULATIONS IN STRATEGIC TECHNOLOGY TRANSFER

Security Based Export Controls

Trade restrictions in the United States are enforced to prevent

the transfer of militarily critical technologies [11] to the

Soviet bloc[12], mainly for national security purposes. Computer

technology, in particular[13], is easily converted from commer-

cial/civilian to strategic or military use and therefore is

subject to security based export controls[14].

Recent studies indicate that Soviet acquisition of high

technology, including computers, from the West has significantly

enhanced Soviet military capabilities and has substantially

eroded the longstanding United States lead in advanced technolo-

gy weapons[15]. One clear example of necessity of legal control

on technology Reexports is the case of Toshiba Machine company

(a Japanese manufacturer) and the Kongsberg-Vaapenfabrikk

Trading company (Norway), who in 1987 sold a sophisticated

Computer-Calibrated Milling Machine to Soviet Union for the

production of advanced propeller blades that eliminate the noise

which allows the U.S. to locate and track or trace Soviet sub-

marines. This sale contravened Allied High Technology Export

Controls.

The Pentagon Investigations concluded that the damage done by


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the Toshiba diversions is difficult to assess; this case "was

the single worst case of technology diversion that has ever

occurred because of its impact on western defense..." [16] This

case clearly establishes the need for strict legal control on

exports/reexports of militarily critical technology which is

likely to fall in the hands of unfriendly nations indirectly.

Such an event would undermine the qualitative technological

leads on which the United States and its allies depend to deter

the quantitatively superior Soviet military power. This is true

for European sector also as in most of the post war period, NATO

has relied on the American strategic technology[17].

In fact the preservation of NATO's qualitative technological

edge over the Warsaw Pact has become even more crucial to

western European security[18].

CONCERTED MULTILATERAL LEGISLATIVE ACTIVITY TO PREVENT

UNAUTHORIZED TECHNOLOGY EXPORTS

By reason of advanced computer and microelectronic technologies

developed in the West becoming susceptible to diversion to other

allied or neutral third countries for reexport to Soviet Union,

preventing their unauthorized transfer became the main need of

United States legislation on export controls. The ultimate

success would only be possible by a concerted multilateral

action[19].

The congress was faced with a difficult task to devise and

implement export controls that are enforceable, mutually


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acceptable to the western world, and to strike a balance between

restricting exports vital to western security and permitting

exports with low military but high commercial value[20].

Presently, exports of potentially strategic or militarily

critical technology from the United states to the Soviet Union

and other countries are regulated unilaterally for U.S. national

security purposes by the Export Administration Act[21]. Multi-

lateral control over East-West computer and other high-tech.

transfers is overseen by the Coordinating Committee on Multilat-

eral Export Controls (CoCom) consisting of an informal committee

of representatives from the principal industrialized democra-

cies[22].

"RIGHT TO EXPORT" versus NATIONAL SECURITY & FOREIGN POLICY

Although intellectuals have criticized Western strategic

trade/export controls as ineffective in restraining Soviet

acquisition of potentially strategic technology, many have

questioned whether security based export controls are benefi-

cial[23]. The evidence indicates that legal impediments to

eastward technology transfer play a vital role in Western

security[24]. However, such security benefits from high technol-

ogy transfer controls are currently being outweighed by the

restrictive effect of those controls on U.S. technological

innovation in the commercial sector.

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Footnotes

1. UNCTAD, Guidelines for the Study of the Transfer of

Technology to Developing Countries. (N.Y., U.N. 1972) p.5.

2. Cited in C. Contreras, Technology Transfer:- A Survey and

Some Policy Proposals, Office of the Field Coordinator, STPI

Project, (LIMA: March 1975), p.5 (in revision).

3. Amilcar Herrera, La Creacion de la Technologia Como Expresion

de Cultura, Mimeo. Seminario Conieyt ILOIS; Santiago, Chile,

1973.

4. Jorge Sabato, El Comercio de la Technologia, Regional Program

for Scientific and Technological Development, Department of

Scientific Affairs, General Secretariat of the Organization of

American states, Washington, D.C.

5. Ignacy Sachs, Transfer of Technology and Strategy of

Industrialization, in Industrializacion Commercio de Technologia

of Subdesarrollo Economico, ed, by H.S. Wionczek, Coordinacion

de Ciencias, 1973.

6. See footnote No:1, supra.

7. Eugene Staley, The Future of Underdeveloped areas: Political

Implications of Economic Development 1 (N.Y.Harper, For Council

of Foreign Relations, 1954); See Denison, Why Growth Rates

Differ: Post War Experience in Nine Western Countries

(Washington: The Brookings Institute, 1967); Colin Clark,Conditions for Economic Progress, (London: Macmillan 1940); and

PUGWASH Conference on Science & World Affairs Working Group on

Code of Conduct on Transfer of Technology, Draft Code of Conduct

on Transfer of Technology, (Geneva: April 1974).

8. W.Fikentscher, The Draft International Code of Conduct on the

Transfer of Technology (1980).

9. Knowledge being a community resource, it can be compared to


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materials and other natural resources like solar energy, etc.

Pendleton, Intellectual Property, Information Based Society &

the New International Economic Order 2 E.I.P.R. 31 (1985);

Wilner, Transfer of Technology: The UNCTAD Code of Conduct,

in "Legal Problems of Codes of Conduct for Multinational

enterprises", 177 (N.Horn, ed., 1980), and 18 HARV. INT'L. L. J.

309 (1977).

10. UNIDO, Lima Declaration and Plan of Action on Industrial

Development and Cooperation, U.N.I.D.O. Doc. ID/B/155 Add. 1

(1975), reprinted 14 I.L.M. 826 (1975).

11.The U.S. Department of Defense defines militarily critical

technology as Technologies that consist of (a) arrays of design

and manufacturing know-how (including technical data), (b)

Keystone manufacturing, inspection, and test equipment; (c)

Keystone mate

rials, and (d) goods accompanied by sophisticated operation,

application, or maintenance know-how that would make a

significant contribution to technological development of

countries and that may prove detrimental to the security of theUnited states. U.S.Department of Defense, Directive No: 2040.2,

International Transfer of Technology, Goods, Services and

Munitions, Encl. 3., at 3-1 (Jan. 17, 1984). See also

U.S.Dept. of Defense Directive No:5105.51, Defense Technology

Security Administration, Encl. 1,at 1-1 (May 10, 1985).

12.In view of the central role the Soviet military capabilities

play in U.S. National Security Policy formulation, this article

focuses on the changes in law caused by militarily applicable

advanced technology transfers from the West to the Soviet bloc,

defined here as the constituent membership of the WARSAW pact

:-Bulgaria, Czechoslovakia, GDR, Hungary, Poland, Rumania and

Soviet Union. Moscow supervises economic relations between

Warsaw Pact members, through Council for Mutual Economic

Assistance [COMECON]. See INT'L. INSTITUTE FOR STRATEGIC

STUDIES, Strategic Survey: 1985-86, at 96 (1986); and

Dobrovolny, East-West Trade in a Transition Period, 17 E. EUR.

Q. Sept. 1983, at 331.

13.Computer Technology is defined broadly for purposes of this

analysis to include, interchangeably or collectively: Computerhardware, software, knowledge of design and manufacturing, and

related technical data. Strictly speaking the term technology is

usually understood to exclude actual goods or hardware. Methods

for obtaining the specific know-how entail the acquisition and

subsequent analysis of the actual end product. OFFICE OF THE

UNDERSECRETARY OF DEFENSE FOR POLICY, U.S.DEP'T OF DEFENSE,

Assessing the Effect of Technology Transfer on U.S./Western

Security: A Defense Perspective 3-11 (Feb.1985).


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14.National security concerns are also reflected in the

Invention Secrecy Act of 1951, Pub. L. No.256, 66 Stat. 3,

codified as amended at 35 U.S.C. sections 181-188 (1982); the

Trading with the Enemy Act of 1917, Pub. L. No. 91, 40 Stat.

411 (1917), amended by Pub. L. No. 99-93, 93 Stat.449 (1985),

codified as amended at 50 U.S.C. app.; See also Cinquegrana &

Shepherd, The Current Legal Basis for Controls on the "Export"

of Technical Information, 7 B.C. INT'L. & COMP. L. Rev. 285,

297-301 (1984).

15.Carrington, Soviet Closing Technology Gap Pentagon Says, Wall

Street J., Mar. 26, 1986, at 12 col. 1.

16.Sanger, U.S. Reserves Position on Damage by Toshiba,

N.Y.Times, Mar. 14 1988 (Nat'l ed.) at 21, col.1.

17.The Conventional Forces of NATO and the WARSAW PACT, in

INTERNATIONAL INSTITUTE FOR STRATEGIC STUDIES, The Military

Balance: 1987-88, at 226-34 (1987).

18.Markham, Europe Considers How To Take Up Arms, N.Y.Times Dec

20. 1987, at E 2, col.1.

19.Technology Transfer Hearings Before the Technology Transfer

Panel of the House Comm. On Armed Services, 98th Cong., 1st

Sess.(1983); and Comment, The Export Administration Act of 1979:

An Examination of Foreign Availability of Controlled Goods &

Technologies, 2 NW.J. INT'L. L. BUS. 179 (1980).

20.Transfer of Technology Hearings on S. 986 Before the

Permanent SubComm. on Investigations of the Senate Comm. on

Governmental Affairs. 98th Cong., 2d Sess. 283 (1984).

21.Export Administration Act of 1979, Pub. L. No. 96-72, 93

Stat.503 (1979), amended by Export Administration Amendments Act

of 1981, Pub. L. No. 97-145, 95 Stat. 1727 (1981); the Export

Administration Amendments Act of 1985, Pub. L. No. 99-64,

sections 101-301, 99 Stat. 120-162 (1985), codified at 50 U.S.C.

app., sections 2401-2419 (1982 & Supp. III 1985). See also Arms

Export Control Act of 1976, Pub. L. No. 94-329, 90 Stat. 729

(1976), amended by International Security and DevelopmentCooperation Act of 1981 at 22 U.S.C.A. sections 2751-2796 (c)

(West Supp. 1987), 22 C.F.R. sections 121.1-15 (1986).

22.The United States is authorized to participate in CoCom by

the Export Administration Act of 1979, codified at 50 U.S.C.

app., section 2416 (e) (1982). Other participants are Belgium,

Canada, Denmark, France, FRG, Greece, Italy, Luxembourg,

Netherlands, Norway, Portugal, Spain, Turkey and the United

Kingdom.


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23.Berman & Garson, United States Export Controls: Past, Present

and Future, 67 COLUM. L. REV. 791 (1967).

24.Progress in Curbing Technology Transfer, cited by Defense

Department in Report 20, U.S. Export Weekly (BNA) No. 36 at 1056

(June 12, 1984).

EXISTING TECHNOLOGY EXPORT CONTROLS

Multilateral High Technology Export Controls by CoCom

Current legal restrictions on the transfer of technology from

the West to East of militarily critical technology could be

divided into two broad strategic trade control structures:- (1)

the domestic, unilateral regulations on exports from the United

States[1] promulgated under the Export Administration Act of

1979 as amended and reauthorized in 1985 (EAA)[2], and (2) the

relatively less restrictive multilateral high technology export

controls administered by CoCom (CoCom is also referred to as the

International Export Control Coordinating Committee or the

Coordinating Committee for Multilateral Security Controls).

CoCom is a semi secret, non-treaty organization comprised of

representatives from the United States[3], and other member

countries. The NATO allies coordinate through CoCom the export

controls on strategic technology and materials bound for, or

potentially transferable to other communist countries or Soviet


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Union[4]. Operating in terms of mutually agreed political

arrangements, CoCom does not have a treaty status, as a result

whereof its decisions are non binding.

The CoCom decisions gain legal force only when its member

nations carry out its recommendations through their national

export control program[5]. CoCom therefore lacks effective

enforcement machinery and its list of strategic export items

(the International List) is somewhat less restrictive than the

U.S. Commerce Department's Commodity control List[6]. This list

incorporates only those items which are unanimously approved for

strategic control by the member nations, namely, items designed

especially for the development, production, or utilization of

arms, ammunition, or military systems; goods incorporating

unique technological know-how, the acquisition of which might

give significant direct assistance to the development and

production of military systems; and those items in which

controlled destination countries have a deficiency hindering

their military capacity that is not likely to be overcome soon.

CoCom has devised a five fold control procedure, viz:-(1) the

General Embargo, which encompasses items that must be submitted

to CoCom for consideration and may be exempted if unanimously

approved by members; (2) Favorable Consideration, which covers

items not subject to general embargo that will be considered

favorably for export on a case basis where certain specified

conditions are met; (3) One Time Review and Listing, (the 45

days procedure) where a decision to allow an export is taken in


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45 days and CoCom may thereby allow subsequent exports of the

product to be either unrestricted or controlled under an

administrative exception, (4) Notification, enlists items

already approved nationally for export which, nevertheless

requires a 30 days advance notice to CoCom, (whereas CoCom's

approval is not required) and (5) Administrative Exception

Notes, which cover items to be exported at national discretion

and only require the reporting of certain statistics to CoCom on

a monthly basis[7].

Therefore, CoCom rules (like the United States export laws)

recognize and distinguish between different export destinations.

Since the Soviet invasion of Afghanistan, CoCom has refused to

permit general embargo exceptions for proposed exports to the

U.S.S.R., although such exceptions are still available for

exports to Eastern European countries. Whereas, in consonance

with liberalization of United States controls on exports to

China since past more than ten years, CoCom has also begun

treating China more liberally as against other proscribed

destinations[8]. However, it is pertinent to note that the

Proposed Rule [Technical Data, Software, and Their Direct

Product, 53 Fed. Reg. 40074, Oct. 13, (1988)] while conforming

U.S. technical data controls to those of CoCom in some respects,

would leave many aspects of U.S. regulations at odds with the

controls of U.S. allies who are members of CoCom (No CoCom

nation requires written assurance against reexports of technical

data, or controls exports of the direct product of technical


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data).

The Industry Coalition of Technology Transfer (ICOTT) maintains

that export controls can succeed only if imposed and enforced

multilaterally. In any case CoCom refrains from imposing the

type of reexport controls as United States does. Most CoCom

friendly and unfriendly nations vehemently object to U.S.

assertions of extraterritorial jurisdiction in export controls

on the ground that they amount to impermissible infringement on

their sovereignty[9].

TECHNOLOGY EXPORTS IN CONCORD WITH U.S. FOREIGN POLICY &

NATIONAL SECURITY

Export restrictions are formulated in accordance with U.S.

foreign policy. The United States government has in past forty

years devised a system of controls for the purpose of protection

of national security and for furtherance of the political

ambitions of the nation.

As the racist policies of South Africa [10] negate the well

founded principles enshrined in the U.S. Constitution, and the

policies of Libya[11] and Syria[12] support international

terrorism, U.S. government has imposed certain severe

restrictions on exports to these territories.

United States is the pioneer in use of economic sanctions in

control of trade relations[13]. The Export Administration Act of

1979 imposes controls mainly in war time for the purpose of

achievement of economic goals and for national security[14].


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ENACTMENT OF EXPORT ADMINISTRATION ACT

The Export Controls Act of 1949 [15] was mainly for protection

of U.S. security against threats to the nation. It was the first

systematic attempt to channelize and control exports during

peace time. Although, its purpose was militarily oriented as it

restricted exports of materials that could enhance military

capabilities of unfriendly states[16].

The Congress shifted emphasis[17] from the word control to

administration at the time of enactment of the present Export

Administration Act. The very specific guidelines provided by the

Export Administration Act curbed the unguided Presidential

authority with respect to export controls[18]. The restrictions

contained in the earlier export legislation remained essentially

the same in the Export Administration Act specifically those

provisions that were in consonance with U.N. agreement to impose

economic sanctions[19], and the restrictions on nuclear items

likely to destabilize world zones and to further communist

policies[20]. The Export Administration Act (for short EAA)

granted authority to the President to prohibit/curtail export of

any goods/technology if the exporter/goods/technology is within

the jurisdiction of U.S.[21]. The United States Customs service

also shares the responsibility for enforcing the export adminis-

tration regulations.

PROCEDURE OF EXPORT CONTROL UNDER EXPORT ADMINISTRATION ACT

The export controls are imposed through a system of dual


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are for furtherance of U.S., foreign policy goals[31], and to

support international obligations[32] to take steps against

international terrorism[33], and to protect the country's

international reputation.

CRITERIA GERMANE TO EXPORT CONTROL RESTRICTIONS BASED ON FOREIGN

POLICY

Criteria having nexus with and germane to imposition of foreign

policy restrictions are:- (i) likelihood that controls will

achieve the foreign policy objects and further multilateral

cooperation, (ii) compatibility of these controls with such

objectives, (iii) effect thereof on U.S. export performance, and

(iv) the possibilities of effective enforcement[34].

The ultimate decision on imposing such controls is taken by the

Secretary of Commerce in consultation with special officers, the

Executive Branch and the Congress. The affected industry is also

consulted if possible and the countries in which such controls

are maintained cooperatively. Generally such controls are

effective for a year unless they are renewed. The Secretaries of

Commerce and Defense maintain a Control List of all items

subject to national security and foreign policy restrictions;

the list is inclusive of all concerned nations. However, there


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exists no automatic termination of outdated controls. Another

category of export restrictions is short supply controls, which

are provided mainly to protect U.S. economy from a drain of

scarce materials.

FOOTNOTES

1. Regulations: 15 C.F.R. sections 368-399 (1987) promulgated

under

the EAA are administered by the International Trade

Administration of the U.S. Department of Commerce. See Boyd &

Whisman, The U.S. Law of Export Controls: A Selected

Bibliography, 18 INT'L. LAW 483 (1984); See also 21 TEX. INT'L.

L. J. 183, 183-85 (1985).

2. Many attempts were made to amend EAA since its passage in

1979. On the 1981 amendments, see Evrard, The Export

Administration Act of 1979: Analysis of its Major Provisions and

Potential Impacts on United States Exporters. 12 CAL. W. INT'L.

L. J. 1, 35-38 (1982).

3. U.S. was initially authorized to participate in CoCom by the

Mutual Defense Assistance Control Act of 1951, Pub. L. No. 82-

213, 85 Stat. 644 (1951), codified at 22 U.S.C. sections 1611-

161 3(d) (1976); superseded by the Export Administration Act of

1979, Pub. L. No. 96-72, 93 Stat. 503 (1979), codified at 50U.S.C. app., section 2411 (e) (1982).

4. Except Iceland and Japan

5. CoCom: Limitations on the Effectiveness of Multilateral

Export Controls, 2 WIS. INT'L. L. J. 106, 119-20 (1983).

6. U.S. CONGRESS, OFFICE OF TECHNOLOGY ASSESSMENT, Technology

and East-West Trade 153 (1979).


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7. G.Bertsch, East-West Strategic Trade; CoCom and the Atlantic

Alliance, (ATLANTIC INSTITUTE FOR INTERNATIONAL AFFAIRS, Paper

No. 49, 1983).

8. U.S. Allies Speed Technology Export to China, 28 RES. & DEV.

40 (1986); Hershey, Technology Exports to China, N.Y.Times, Oct.

17, 1985 at D 21, col.4, Re.Proposed Rule: Technical data,

Software, and their direct products, 53 Fed.Reg. 40074, Oct. 13,

1988.

See also Industry Coalition on Technology Transfer (ICOTT) on

Proposed Rules for Data Export Controls, Inside U.S. Trade, Dec.

2, 1988, 779.1(f)(5)(c), where it is mentioned that the U.S.

subjects the Moon computer Model 386 to national security export

controls because it has processing data rate of 185 mb/s.Technologies not essential to its design include production

technologies and floppy disk drive design technologies, because

they do not cause the Moon 386 to be controlled.

However, design information relating to the CPU causes the com-

puter to be controlled and hence controls thereon would be re

quired.Explicit inclusion within GDTU of mass market software

would relieve U.S. software producers of a substantial hindrance

to their competitiveness abroad. By the approval of this

proposal the treatment of mass market software would become

consistent with CoCom rules. Although creation of GTDU and

simplification of GTDR removes confusion regarding the use of

general licenses for technical data software, it passes

comprehension as to why other forms of general licenses (G-COM &

GFW) are conspicuously absent in the proposed amendment. The

other forms of licenses relevant are:-GIT, GLV, BAGGAGE, CREW,

GUS GCG, G-CEU, GLR, GTF-US & GTE.

9. Kincannon, The Dresser Case: One Step Too Far, 5 N.Y.L. SCH.

J. INT'L. & COMP. L. 191 (1984).

10. South African Transactions Regulations, Exec. Order Nos.

12,532 & 12, 535, 31 C.F.R., section 545 (1987).

11. Libyan Sanctions Regulations, Exec. Order No. 12, 543, 31

C.F.R., section 550 (1987).

12. Statement by the Principal Deputy Press Secretary to thePresident 22 Weekly Comp. Pres. Doc. 1563 (Nov. 14, 1986). It

deals with the expansion of national security export controls

against Syria in reaction to Syria's involvement in terrorist

activities.

13. Carter, International Economic Sanctions: Improving the

Haphazard U.S.Legal Regime,75 CALIF. L. REV. 1159, 1168 (1987).

14. The President's authority to use economic sanctions as a


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foreign policy tool is in section 201 of the Trade Act of 1974,

19 U.S.C. 2251 (1982). [Authorization of relief in cases whereat

substantial imports are likely to cause injury to U.S.

industry.] Whereas in 19 U.S.C. section 2411 (1982) President

is authorized to retaliate against trade restrictions imposed

against the United States by foreign governments, id. section

2436 (1982) authorizes the President to grant relief from

import-dumping by communist countries.

Under the provisions of the Trade Expansion Act of 1962 the

President is at liberty to control imports if the same are

deemed to be essential for national security, 19 U.S.C. section

1862 (1982).

Therefore, how ever rarely, the export controls are also used

for achievement of political ends necessary for the governance

of the nation. President also uses financial controls intransnational transactions to be effective in curbing

international terrorism, under the provisions of the Foreign

Assistance Act of 1961 section 620 (e) at 22 U.S.C. section 2370

(e) (1) (1982).

15. Export Control Act of 1949, Pub. L. No. 81-11, 63 Stat. 7,

reprinted in 1949 U.S. CODE CONG. & ADMIN. NEWS (superseded in

1969).

16. Bingham & Johnson, A Rational Approach to Export Controls,

57 FOREIGN AFF., 894, 896 (1979). See also U.S. v

Curtiss-Wright Export corp., 299 U.S. 304, 322 (1936); 19

COLUM. J. TRANSNAT'L. L. 255-58 (1981).

17. CONF. REP. No. 681, 91st Cong. 1st Sess., 1969 U.S. CODE

CONG. & ADMIN. NEWS 2716, 2719-20. See H.R.Rep.No. 524, 91st

Cong. 1st Sess. (1969); U.S. CODE CONG. & ADMIN. NEWS 2705-10.

18. See Export Administration Amendments of 1977, Pub. L. No.

95-52, section 107, 1977 U.S. CODE CONG. ADMIN. NEWS, 91 Stat.

235, 238, codified at 50 U.S.C. app., section 2403 (2)(A)

(superseded 1979); U.S. CODE CONG. & ADMIN. NEWS 362, 374.

19. G.A.Res. 1761, 8; 17 U.N.GAOR Supp.( No. 17) at 9, 10.

U.N.Doc. A/5217 (1962), encouraging sanctions against South

Africa; G.A.Res. 500.1, 5 U.N.GAOR Supp. (No.20a) at 2, U.N.Doc.A/1775/Add. 1 (1951), controls on exports to North Korea.

20. A. Lowenfeld, Trade Controls For Political Ends, section

1.32, International Economic Law Vol. 3, 2d ed. 1983.

21. 50 U.S.C. app., sections 2404(a), national security

controls; id.,section 2405 (a), foreign policy controls; id.,

section 2406(a) (Supp. III 1985), controls on reexports are also

provided thereat.


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22. President delegated a large portion of power conferred on

him under the 1969 Act to the Secretary of Commerce, Exec. Order

No. 12,002; 42 Fed. Reg. 35,623 (1977), at 50 U.S.C. app.,

section 2403 note (1982). President Reagan continued these

orders.

23. 50 U.S.C. app., section 2404 (f) (5) (Supp. III 1985).

24. Id. section 2403 (a) (3) (1982).

25. Id. section 2403(a) (1), handling procedures; id., section

2409 (1982 and Supp. III 1985). Cf. id., section 2402 (10) (c)

(1982).

26. Id. section 2403 (a) (2) [Supp. III 1985]. National security

controls are guided by section 2404 (e) (1982 & Supp. III 1985).

27. Id. section 2402 (2) (A) (1982), 16 WEEKLY COMP. PRES. DOC.

32 (Jan.7, 1980). President Carter's agricultural embargo

against Soviet Union was justified as a national security

control. However, now the position of such embargo is distinct;

See 50 U.S.C. app., section 2404 (q) (Supp. III 1985).

28. See: Section 38 of the Arms Export Control Act, 22 U.S.C.,

section 1778 (1982), exports of military technology, materials,

information and services. See 50 U.S.C. app., section 2404 (a)

(1) (Supp. III 1985), for controls on export of technical data

under EAA.

29. 50 U.S.C. app., sections 2404 (i) (k) (1982 Supp. III 1985).

The Coordinating Committee on Multilateral Export controls. Its

member states are Japan and all NATO states, excluding Iceland.

See BUS. AM., Mar. 2, 1987, at 13; See also U. TOL. L. REV. 1285

(1983).

30. 50 U.S.C. app., sections 2404 (b) (1) (A) - (F) (Supp. III

1985).

31. Id. section 2402 (2) (B), 2405 (1982 and Supp. III 1985).

32. Id. section 2402 (2) (B), 2405 (i).

33. Id. section 2402 (7) (Supp. III 1985) and section 2402 (13).

34. Id. section 2405 (b) (1) (A)-(E) and 50 U.S.C. app., section

2405. (e) (Supp. III 1985).


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JURISDICTIONAL ISSUES IN TECHNOLOGY EXPORTS

Proprietary technology sellers always impose restrictions on the

transfer and use of their licensed technology by means of a

contract agreement. In the light of certain attendant

circumstances extraterritorial reach of the laws has been

deemed valid and operable. Every state has a right to exercise

jurisdiction over the conduct of its nationals residing in

foreign land. The effects doctrine grants recognition to the

need and right of state to protect itself and its citizens by

exercise of jurisdiction with respect to conduct outside its own

territory having or intended to have substantial consequences

within its borders.


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The concept of protective principle applies in protecting a

state's interest with respect to certain classified offenses

i.e. espionage, counterfeiting, falsification of official

documents, smuggling of technology and goods etc. However, there

has been no decided case so far, by any of the international

tribunals, on the permissible jurisdictional reach of export

controls. Whereas customary international law contains no

explicit prohibitions with respect to the control on reexports,

Jurisdictional reach is primarily territorial. Mostly, the terms

of strict conditions are applied before the controlled items

leave U.S. territory. Nevertheless, in case of proprietorship

transfer of technology the compliance and observance of

conditions needs to be extended also to post-export operations.

In spite of unresolved conflicts, the concept of comity plays a

major role in balancing of conflicting interests. The prime

consideration would be as to whether a state should exercise

restraint and not assert jurisdiction over its activities

abroad; and whether comity calls for non-interference unless its

substantial national interests are affected.

Progress by CoCom participants has been remarkable in so far as

the attempts of reducing jurisdictional conflicts are concerned.

That apart, strengthening of cooperative export control

arrangements, both within CoCom and beyond it, can be expected

to result in further U.S. steps to reduce or eliminate its

export and reexport requirements.


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EXTRATERRITORIAL IMPLICATIONS OF EXPORT CONTROLS

The basic goal of the U.S. to impose severe restrictions on high

technology exports is to prevent socialist nations from acquir-

ing strategic high tech know-how goods of U.S. origin.

The U.S. policies therefore are tailored to restrict technology

transfers to other nations. These policies have not only

domestic consequences but other countries also had to amend

their laws to harmonize their system with the U.S. export

controls in order to avail themselves of the benefits of latest

technological innovations of the United States.

Section 374.1 of Export Administration Regulations

establishes[1] prohibitions on reexporting U.S. high technology

by foreign importers. These provisions have stirred up contro-

versial[2] reactions in some countries whereas other countries

have accepted their implications. In fact it is not only the

U.S. but other developed countries also have enacted similar

legislation to prevent their technology from falling into the

hands of their opposing nations.

Restrictions on reexport are widely accepted[3] and imposed in

Austria[4], Switzerland[5], and Sweden[6].

U.S. State Department negotiates safeguard agreements with

importing countries for proper implementation of such export

restrictions. In export of Cyber-205 supercomputer to India the

safeguard agreement provided "prohibitions against transferring

supercomputer technology to other countries, notably the Soviet

Union, and using the machine to help develop nuclear


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weapons"[7].

INFLUENCE OF EXPORT CONTROLS ON FOREIGN LAW

The new legislation enacted by Austria, Switzerland and Sweden,

noted above, is generally believed to be a concession made to

remain in touch with inflow of the U.S. technology/high tech

goods[8]. It is, therefore, clear that desire to obtain U.S.

based technology over- comes the possible inhibition caused by

such extraterritorial reach of U.S. export laws. France with its

own high-tech reserves, has tailored its legislative activity to

suit U.S. policy.

At times U.S. law becomes a major factor perpetrating change in

foreign legislation. The distribution license system created by

the 1985 amendments to EAA tend to influence foreign law.[9.

The distribution license allows multiple exports simplifying the

procedural requirement of applying for separate export license

for each consignment or transaction. However, grant of such a

licence is subject to reliability of the foreign consignee. In

other words, a corporation is highly unlikely to be certified as

a reliable consignee if the foreign law by which it is governed

is in conflict with the U.S. standard. Therefore, it is now

clear that a country desirous of having latest innovations in

U.S. technology has to amend its law to be in consonance with

U.S. policies.

This fact is conspicuous by legislative activity in Great

Britain, where in order to assist the companies incorporated in


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United Kingdom in obtaining a status of approved consignee, the

U.S. Commerce Department investigators are allowed to conduct

system audits of British corporations[10].

Foreign law is also influenced by the two new categories of

licence i.e. GCG license [11] and G-CEU license[12]. The former

applies to cover shipments to agencies of foreign governments

and the latter applies to the shipments to the end-users. Both

these licenses are granted only when the importing country is

classified as cooperating government. This law acts as a

determinative incentive to a foreign government to enact

suitable law to become eligible for being classified as a

cooperating government.

The U.S. policing of exports is done by Operation Exodus a

specialized unit of federal agents who operate abroad[13]. Soon

after the creation of Operation Exodus, in response to U.S.

prese, Great Britain set up a similar system named Project

Arrow[14].

Sweden's response was apparent when it undertook investigations

concerning violations of EAA provisions by Datasaab Contracting

A.B. (a Swedish corporation)[15].

The United States has had a remarkable success in imposing

export control policy standards in Switzerland, Finland, Hong

Kong, Belgium and Japan.

COMPELLING NECESSITY OF EXPORT CONTROLS IN POTENTIALLY STRATEGIC

TECHNOLOGY TRANSFERS


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Western and Eastern nations have now realized the necessity of

imposing export controls on foreign consignees with respect to

militarily critical and strategic technology. Many other

countries enter into bilateral agreements to establish such

cooperative controls and reinforce restrictions on direct

exports.

To have access to latest technology, many nations have by now

adopted laws that make U.S. reexport restrictions binding on

their own citizens.

Domestic Implications : Proposals to relax clamps on reexports

Export restrictions are basically a compromise between the two

conflicting policies: (1) preventing sensitive, potentially

strategic technology from reaching unfriendly nations; and (2)

promoting exports in general. If such exports are unrestrained

and liberal the potential adversary may get armed against U.S.,

whereas maintaining rigid controls would act as an impediment in

foreign trade which may cause trade imbalances at the sufferance

of domestic industry. That being the focal point of reexamina-

tion of export control policy[16], four different bills have

included proposals to relax reexport controls on materials &

technology destined for reliable countries i.e.:

(i) the High Technology Trade Promotion Act[17];

(ii) the Export Administration Amendments of 1987[18];

(iii) a Bill introduced on March 3, 1987 by Senators Cranston,

Evans and Adams[19];


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(iv) a legislative proposal presented by the American

Electronics Association[20].

Therefore U.S. induced changes in foreign export control law

necessitates changes in turn in its own domestic laws.

FOOTNOTES

1. Export Administration Regulations, 15 C.F.R., sections 368-

399 (1987), (for short EAR), to implement Export Administration

Act of 1979. Objectives at 50 U.S.C. section 2401-2420 (Supp.

III 1985).

2. European Economic Community has criticized such a

prescription seeking extraterritorial enforcement of U.S. laws.

See European Communities: Comments on the U.S. Regulations

Concerning Trade with the U.S.S.R., 21 I.L.M. 891 (1982).

Various states enacted blocking legislation to defend themselves

against the extraterritorial applications of U.S. law in their

sovereign land. See The Protection of Trading Interests Act,

1980, ch.11, at 21 I.L.M. 834-39 (1982) (United Kingdom

legislation).


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Other countries with similar enactments include Australia,

Canada, France and South Africa.See Foreign Proceedings (Excess

of Jurisdiction) Act, No. 3 (Australia 1984). Foreign

Extraterritorial Measures Act, 1984 ch. 49, (Canada); Decree

No: 81-550 of May 12, 1981, concerning the Transmission of

Documents or Information of an Economic, Commercial or Technical

Nature to Foreign Individuals or Legal Persons (France); and the

Second General Law Amendment Act, No. 94, section 2. (South

Africa).

3. Marcus & Mathisa, U.S. Foreign Policy Export controls: Do

They Pass Muster Under International Law ?, 2 INT'L. TAX & BUS.

LAW. 1,20-22 (1984).

4. Federal Law of Dec. 12, 1984, amending the Foreign Trade Act

of 1984, at 25 I.L.M. 848 (1986). This law was enacted to effect

U.S. approval for an Austrian - U.S. High Tech, joint venture.

See J.Tuck, High-Tech. Espionage 198-99. (1986).

5. Ordinance on the Reexport of High Technology of Dec. 16, at

25 I.L.M. 919 (1986).

6. Ordinance on the Reexport of High Technology of Feb. 27, 1986

at 25 I.L.M. 907 (1986).

7. 4 INT'L. TRADE REP. (BNA) 96 (1987), See also FRG-U.S.:

Agreements on the Transfer of Technology and the Strategic

Defense Initiative, 25 I.L.M. 957 (1986), section 7, (protection

of information).

8. The legislative intent provision of Swedish Ordinance on the

Reexport of High Technology mentions that " it is hard for a

small country such as ours to build up its own research and

manufacturing capacity in all fields. It is therefore of

great importance that Swed- ish industry can be assured

continued access to advanced technology from abroad" F. S.

1986:89 (Swed.), rep., in 25 I.L.M. 907 (1986).

9. Id. section 2403 (a) (2) (A).

10. Boston Sunday Globe, Feb. 22, 1987, at A 16, col. 1, The new

British rules have relaxed its protest for commercial

considerations balanced with British nationalist concerns. Id.

at A 17, col.3.

11. It is a General License Cooperating Agreement, at 15 C.F.R.,


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sec-tion 371.14 (1987). See 52 Fed. Reg. 5275 (1987).

12. This is a General License Certified End Users, at 15 C.F.R.,

section 371.20 (1987). See 52 Fed. Reg. 5275 (1987).

13. Jay Truck maintains that Operation Exodus is a special task

force created in Oct. 1981 within the Customs Department. It has

over 400 trained agents operating from U.S.Embassies &

Consulates abroad- to detect & stop illegal shipments of

technology to the East. In first year of its existence Operation

Exodus seized 2,330 illegal shipments with an estimated total

value of $148.8 million, J.Tuck, High Tech. Espionage, at

193-94.

14. Id. at 69. Created in Nov. 1983 with nine Customs agents and

three specialists from the Trade and Industry Department.

Project Arrow operates as a Customs and Excise unit.

15. Jay Tuck mentions:- "The same squeeze was soon applied to

the government of Sweden. Stockholm was reminded that crucial

components for Swedish Air Force fighter-interceptors were madein U.S.A. If deliveries were to continue, cooperation was

expected. In April 1984, after years of futile negotiations on

the Datasaab Case .....the Swedish Foreign Office finally

declared it [Datasaab] was prepared to pay a civil penalty of $1

million, Id. at 199. See also Folsom, M. Gordon,

R.J.Spanogle, Int'l. Business Transactions. 614-15 (1985).

16. N.Y.Times, Jan. 14, 1987, at D1, col.,2. See Blair,

Viewpoints: Towards a Workable System of Controls on the Export

of Technology, 21 TEX. INT'L. L. J. 363, 371 (1986).

17. H.R. 1141, 100th Cong., 1st Sess. 133 CONG. REC. H. 733

(1987),elimination of requirement for reexport licenses within

CoCom, from CoCom and from countries with CoCom type

arrangements, 4 INT'L. TRADE REP. (BNA) 254 (1987).

18 S.547, 100th Cong. 1st Sess., 133 CONG. REC. S. 2228 (1987),

reexport control provisions to prohibit their use for resale

within COCOM countries, and to prohibit them in certain parts

and components.

19. S.652, 100th Cong., 1st Sess., 133 CONG. REC. section 2628

(1987), review of goods shipped to unreliable end user`s by

Commerce Department.

20. Association's nine point proposal contains the elimination

of reexport controls on U.S. products reexported to, within, oramong CoCom countries or others agreeing to CoCom type controls

as per section 5 (k) of the Export Administration Act, except

for high level goods not eligible for bulk licensing. Proposal

contains "creation of an export/reexport license-free zone


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regulated by bilateral or multilateral agreements establishing

the necessary link and cooperation to further complement its own

export controls - for example the U.S. export controls embodied

in EAA.

The success of U.S. export law influencing foreign law is

largely due to other nations' desire for obtaining U.S. High

Techmaterials/goods. EAA makes it as a condition precedent to

export of strategic technology to foreign land that the importer

shall not allow reexports of such material or technology to

specific countries, more particularly to Soviet bloc and

communist countries.

The effectiveness of such conditions was felt when other

countries adopted U.S. laws to make U.S. reexport restrictions

binding on their subjects, basically to ensure for themselves

access to new U.S. technology. Some developing nations also had

to strengthen the enforcement and implementation of their law on

reexports.

On the domestic front export restrictions act as a compromise

between the two conflicting policies i.e. preventing sensitive,

potentially strategic material from reaching unfriendly nations;

and promoting exports in general.

Visualizations of Technology Transfer/Export Controls in the

Future

Although, the proposals to reexamine export control policy are


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directed at solving the economic problems; they reflect a

consensus that the United States has successfully influenced the

internal legislation of many of its foreign trade partners.

These importers/trade partners had to sufficiently strengthen

their export control laws to independently assure the level of

technology protection desired by the United States.

Therefore, without compromising its security, the United States

can liberalize its own export laws in order to promote domestic

economy. United States induced changes in foreign export

controls have led, in turn to responsive changes in the U.S.

legislation also.

Today U.S. is in a position to take lead to be one of the major

factors in pursuing aggressive programs for improvement of

societal bioplasma in the future.

*******