Opening Statement of Congressman Brad Sherman

Chairman, Subcommittee on Terrorism, Nonproliferation and Trade

“Exports Controls: Are We Protecting Security and Facilitating Exports?"

July 26, 2007

The purpose of this hearing is to examine U.S. export controls and how they are implemented. Our laws, regulations, policies, and practices in this area must effectively prevent the spread of weapons and sensitive technologies to countries, groups and individuals of concern, while at the same time allowing appropriate defense trade with our allies for their legitimate self-defense needs.

Our current export control policy was designed three decades ago in the middle of the Cold War. While subtle changes to our export control policy have been made since the fall of the Berlin Wall, there has been no concentrated effort to modernize the system to account for changing foreign policy objectives and the national interest.

We should begin by examining the growing number of export licenses that have been piling up at the State Department. Last year, the backlog of unprocessed licenses at DDTC reached 10,000[1] - a number unheard of in previous years. The Bureau of Industry and Security (BIS) at the Commerce Department is not reporting the same problems, and the numbers paint a clear picture as to why.

Last year, Commerce’s BIS processed 23,673 export control applications with a staff of 351. By contrast, the State Department’s DDTC processed 65,274 applications with a staff of 64.

Moreover, the State Department’s numbers show that license applications have grown at a rate of 8 percent or more every year for the past four years.[2] In this fiscal year alone, the Department expects to receive more than 80,000 applications, a 23% increase from last year.

There has been some recognition of the problem, and I commend the State Department for taking steps to streamline some of the paperwork through electronic submissions forms. The median processing time for a license has doubled since 2002[3], and the agency continues to have trouble recruiting and retaining personnel, including its senior management.

Obviously, when you have a projected doubling of applications over the course of a decade and no more staff, you raise the likelihood of two problems. First, national security suffers because not everyone who should be getting a license does, and it become increasingly easier to violate the conditions of a licensing agreement. Second, you make it unnecessarily difficult for U.S. businesses to supply our allies.

One aspect of the problem is clear: there are simply not enough personnel to handle the growing demand, and the State Department, the Administration, and Congress have either been unwilling or unable to commit the resources needed to address these challenges.

DDTC obviously needs a dedicated, independent funding source. History has shown that the State Department cannot resist raiding these funds for other functions, and it is time for Congress to take action.

There are also turf battles between State and Commerce. For example, Commerce and State have not settled which agency has control over 47 missile-related items.[4] There is also on ongoing turf war over the control of civil aviation equipment, even though Congress specifically laid out in the Export Administration Act (EAA)[5], a provision that places certified civilian-aircraft parts and components under the jurisdiction of Commerce.

I am concerned that we are placing U.S. companies on a playing field dominated by confusion, needlessly adding to our mammoth trade deficit, and creating a perverse incentive to move the development and manufacture of new defense technologies overseas.

The majority of our defense related exports are to long-standing U.S. allies like Japan (27%), Germany (8%), the United Kingdom (7%), South Korea (7%), Canada (4%), Italy (3%), and Israel (4%).[6] These exports are not just a single item like a tank or aircraft, they include the components and services necessary for our coalition partners to maintain, train with, and operate U.S. equipment and technology.

We should carefully examine multiple options including the establishment of guidelines for average processing times. We should also examine the appropriateness of bundling some of the anticipated servicing and repair parts to the initial license for a defense system.

As the GAO notes, neither the Commerce nor the State Department has made any fundamental updates to their export control systems in recent years. Each Department has conducted ad hoc reviews that, unsurprisingly, determined there was no need to make any fundamental changes.

I am eager to hear from all of our witnesses how we can ensure that we are not needlessly blocking exports and inadvertently focusing resources on technologies that are already easily available on the international market.

[2] Department of State, Budget Justification, FY 2008

[4] Government Accountability Office, Briefing Paper Submitted to the House Foreign Affairs Committee on Terrorism, Nonproliferation and Trade, July 17, 2007

[5] Section 17 (c) of the Export Administration Act of 1979 states, in part, that “standard equipment certified by the Federal Aviation Administration (FAA), in civil aircraft and is an integral part of such aircraft, and which is to be exported to a country other than a controlled country, shall be subject to export controls exclusively under this Act. Any such product shall not be subject to controls under Section 28 (b) (2) [licensing requirements] of the Arms Export Control Act.”

[6] Department of State, Budget Justification, FY 2008