USA*Engage submits comment to BIS on the ineffectiveness of foreign policy based export controls

Thursday, 18 November 2004

November 18, 2004

This comment is submitted on behalf of the member companies of the National Foreign Trade Council in reference to Federal Register notice (Vol. 69, #187, p. 57895 – 09/28/04) concerning the effectiveness of foreign policy-based export controls under the Export Administration Regulations (15 CFR Chapter VII).

1) The pursuit at every opportunity of heightened multilateral cooperation to develop more uniform controls and to enforce controls on target countries is of the utmost importance:

a) The combination of U.S. corporations’ commitment to compliance and the complexity and breadth of the U.S. export control regime relative to the regulations competitors are subject to creates a competitive disadvantage for U.S. exporters. In an increasingly globalized economy, both sensitive and non-sensitive commodities are increasingly available from other foreign sources. In the absence of significant price or availability issues, foreign customers may simply find doing business with foreign suppliers more efficient and less risky. As a result, U.S. companies surrender revenue and market share, while the target of our controls obtains the item it needs from other sources;

b) The potential for export controls to achieve intended foreign policy goals is extremely unlikely without multilateral cooperation. Only in cases where the U.S. is the only viable or measurably preferable supplier do controls have substantial impact – an increasingly unlikely situation. Otherwise, buyers simply turn to foreign suppliers for commodities to the exclusion of U.S. companies, rendering our policy goals moot;

c) The importance of multilateral efforts cannot be understated as efforts to impose U.S. export controls on foreign companies beyond U.S. jurisdiction are all the more ineffective. Efforts to extend U.S. law extraterritorially damage trade relationships with allies and can result in litigation and/or retaliation.

2) Bids by U.S. companies that would be eligible are often hindered by certain restrictions that make finalization of the deal, further investment, or continued maintenance or upgrade of product after the initial sale extremely difficult:

a) Current regulations for sales of high tech commodities to Libya to augment the so called “installed base” require verification of the origin of the base. Given the comprehensive trade restrictions in place for decades barring U.S. trade and investment in Libya, exporters must invest an enormous amount of time and resources in an effort to comply when in many cases the origin of the technology is essentially unknowable. In the meantime, transactions with foreign suppliers become increasingly easier to facilitate and thus more attractive;

b) In some cases, companies can obtain licensing for the initial sale of product but face significant delays or denial in obtaining licenses to export replacement parts needed for continued upkeep and maintenance. This damages the reputation of U.S. exporters as reliable suppliers throughout the life of an investment and ultimately damages their chances of obtaining future contracts.


Haynes Roberts
USA*Engage
Project Manager
(202) 887-0278
hroberts@nftc.org

USA*ENGAGE is a coalition of over 670 small and large businesses, agriculture groups and trade associations working to seek alternatives to the proliferation of unilateral U.S. foreign policy sanctions and to promote the benefits of U.S. engagement abroad. For more information on USA*ENGAGE and the harmful effects of unilateral trade sanctions, visit the USA*ENGAGE web site at www.usaengage.org.