Chairman PICKLE. Our next speaker will be Mr. Duelfer, Deputy for the Defense Trade to the Assistant Secretary in the Department of State. STATEMENT OF CHARLES A. DUELFER, DEPUTY FOR DEFENSE TRADE TO THE ASSISTANT SECRETARY, AND DIRECTOR, CENTER FOR DEFENSE TRADE, BUREAU OF POLITICO-MILITARY AFFAIRS, U.S. DEPARTMENT OF STATE Mr. DUELFER. Thank you, Mr. Chairman. I will be very brief. I was warned ahead of time that this committee had a lot of endurance, and I did not realize that that was actually an understatement. I think my statement basically says that the organization and the improvements which we have made in the State Department over the past year and a half in what we call the Defense Trade function, as I understand the purpose of your work here to be mostly on the enforcement side, let me just emphasize a few aspects of our role in that area, and in particular our close relationship with Customs. From my perspective, Customs and State are two sides of the same coin. The regulatory body of law that State has the responsibility for is managed under my jurisdiction, however the enforcement is strictly Customs. So to the extent that there is confusion in other areas, at least in my area it is very simple. If something is under the U.S. munitions list the Customs Service is the sole agency to enforce our laws. We have tried to integrate Customs people and requirements into our organization as much as possible. I have Customs personnel who live and breathe within my office, and they work hand in glove with our officers. They are, in fact, detailed to our office. They have access to all of our material, all of our licenses. We are in the process of establishing a computer link between the two of fices. We are working very hard to make them an integral part of our operation. We are, however, the policy side of the equation and policy side of the coin and Customs takes, as has been stated, its lead from what our decisions are in terms of the control of items on the U.S. munitions list. Let me just stop there and the rest is in my written text, and if you have any questions I will be happy to try to answer them. [The prepared statement follows:] TESTIMONY OF CHARLES A. DUELFER Thank you for the opportunity to appear here today to discuss the defense trade compliance function at the Department of State. I will be speaking today primarily of export control or enforcement in the context of exports produced, designed, or modified for military use. I would differentiate here those articles and services covered by the United States Munitions List (USML) from those exports that, under the Export Administration Act, are also subject to certain controls to ensure consistency with our foreign policy (e.g., controls on terrorism equipment, crime equipment, chemical/biological precursors and nuclear controls). State's Role On the eve of World War II, the Congress enacted the Neutrality Act of 1939. By terms of this statute "every person who engages in the business of manufacturing, exporting or importing any arms, ammunition or implements of war" was required to register with the Secretary of State and obtain a license, which in turn required notification to the Department of State of the purchaser and terms in each sale. Export or attempt to export without a license was made unlawful. Under this statute, the Department of State began to administer a comprehensive arms licensing program. The legal basis for State's current authority to control munitions is the Arms Export Control Act (AECA) and its implementing regulations, the International Traffic in Arms Regulations or ITAR. The latter specifies, in the form of the USML, articles and services that are under State's jurisdiction as well as the requirements for licensing. The State Department's involvement in export control of defense articles and services including enforcement however, is fundamentally a question of foreign policy and national security. - State's Defense Trade Function As a result of a dramatic increase in the volume of munitions export license applications, defense trade staffing in the State Department was found to be inadequate and system enhancements were needed to keep pace with the growing and increasingly complex workload. In order to address these needs the old Office of Munitions Control was revamped and the Center for Defense Trade was established on January 8, 1990. The reorganization of the State defense trade function also included the injection of substantial new resources and the undertaking of a thorough workload reduction initiative. Creation of the position I now hold, the Director of the Center for Defense Trade and Deputy to the Politico-Military Assistant Secretary for Defense Trade was designed to provide full-time, senior level leadership on commercial defense trade issues. In addition to an early emphasis on making the licensing process more effective and efficient, we were also cognizant of the fact that the ability to control the destination and ultimate use of U.S. defense goods is critical to the conduct of our foreign relations and the safeguarding of our national security interests. Therefore, in addition to revamping our licensing mechanism, we have been working to reinforce our compliance efforts. I should note that these two activities go hand-in-hand and are mutually supportive. For example, we have installed a new computer and system for licensing. This now allows us to manipulate our database in ways which are very helpful in our compliance activities. State-Customs Cooperation During the last year, the State Department has expanded its' working relationship with the U.S. Customs Service in the area of enforcement and compliance. The relationship has grown dramatically in terms of case referrals, overall information exchanges, criminal investigations initiated, and a better integration of U.S. Customs officers in day-to-day DTC operations. Currently, Customs has two full-time employees on detail to the compliance division of the Defense Trade Controls office (and a third will be provided shortly). One position, a Special Coordinator for Law Enforcement, provides senior level interaction on policy and investigative enforcement matters as well as oversight in the screening of export license applications for law enforcement concerns. The second position, a program analyst, is the main link between the Customs EXODUS Command Center and the State Department. individual is responsible for coordinating all communications from the Customs operational field offices involving detentions, seizures, license certifications and determinations with the two agencies' headquarters. Also, State and Customs are working on the development of a database interface which will enable frontline personnel in both organizations to communicate rapidly about several aspects of enforcement, including the registration of persons in the defense trade business, the status of ongoing investigations, the disposition of requests for export licenses, and the shipment of articles licensed by State. The Compliance Work Program This Areas of particular scrutiny in State's compliance function include current and actual registration information, review (particularly in terms of indictments or convictions) of officials empowered by firms to conduct defense trade business, proper licensing to stem illegal exports, and the bona fides of stated destinations and end use of U.S. defense trade articles and services. Our work program reflects these concerns: - The initial and renewed registration of the over 4,000 persons in the defense trade business. End-use checks of which over 150 cases have been conducted under a program initiated in September 1990. Preand post-shipment checks on articles and services covered by the USML are conducted by personnel assigned to U.S. diplomatic posts abroad, including Customs where available. This program has becomne a focal point for review/analysis by the intelligence community and Customs as well as a discussion point with friendly governments. - Assistance rendered to U.S. attorneys in plea bargain, cases, in indictment procedures, and trial preparations. Records investigations to assist other goventment agencies in documentation of controlled items and verification concerning controlled items. - Suspensions and debarments of suspected or known violators of the AECA and ITAR. Industry's Role Finally, I must note that we have been successful in raising the awareness of industry to compliance issues and concerns. I find most firms I have dealt with have taken extensive internal measures to assure their activities are consistent with munitions export regulations. I was heartened to see the following quote in a trade journal by a defense industry giant last October: "...selling armaments should be done as an instrument of government policy. ...the world we are going to see is going to be less and less stable so I would believe that it is appropriate for governments to play a major hand in deciding where exports should be made." We believe there is an industry role in compliance and are making every effort to encourage private sector interest, emphasizing vigilance, compliance, and cooperation." |