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American Shipper

BIS plans rulemaking that moves away from China “catch all”

BIS plans rulemaking that moves away from China “catch all”

BIS plans rulemaking that moves away from China “catch all”

   The U.S. Commerce Department’s Bureau of Industry and Security is putting the final touches on a proposed rulemaking that the agency hopes will free up licensing requirements on numerous U.S. exports to China, while still keeping certain “dual use” items, those with both commercial and military applications, out of the hands of the Chinese military.

   “For certain technologies, our new policy will, in the future, free trade of dual use items with certified importers in China for civilian purposes,” said Commerce Undersecretary David H. McCormick at the Center for Strategic Trade and International Studies in Washington on Friday.

   “U.S. exporters seeking to grow market share in critical sectors such as semiconductor equipment and electronics will be spared the need to apply for licenses for potentially hundreds of millions of dollars worth of sales to these companies in China,” he added.

   To become eligible, McCormick explained that the Chinese companies must have a record of nonproliferation of weapons of mass destruction and responsible use of U.S. imports. According to the Commerce Department, U.S. companies exported more than $12 billion in high-tech items to China last year.

   “This process will require unprecedented openness and cooperation on the part of Chinese companies,” McCormick said. “And it will create incentives for them to demonstrate good faith and sound practices. In addition it will allow government officials to focus on more complex cases with more severe implications for American security.”

   The new BIS policy places restrictions on 47 categories of technology. McCormick declined to name the categories, but said they would be highly specialized items, such as avionics and composites.

   The list of approved Chinese importers would also be made public. There will be no “gray zones,” McCormick said. He added that BIS will continue to conduct “on-the-ground spot checks” of U.S. licensed exports to China to ensure that they have not been diverted to the Chinese military.

   McCormick said the Bush administration will urge its trade partners, such as the European Union and Japan, to take similar action. However, he acknowledged that no allies are on board with the concept yet.

   In a brief session with reporters after his speech, McCormick said he hoped the rulemaking would finally put an end to a previous proposed rule, known as the “catch all.” Under the catch all, the U.S. industry feared that anything with a remote possibility of being used by the Chinese military, such as toothpaste and boots, would require an export license. These measures would also go well beyond the Wassenaar Arrangement, an international agreement that requires member countries to closely control dual-use items with the potential for use in conventional weapons.

   “I want to do away with this catch all process through this process,” McCormick said.

   BIS plans to publish the proposed rulemaking soon and will provide a 120-day comment period. McCormick encouraged the industry to comment on the proposed rule. “This is not an issue without complexity,” he said.

   U.S. trade groups and exporters plan to closely watch the progress of the proposed rule. The worry is that BIS may still impose regulations that fail to operate within existing multilateral export control regimes, further disadvantaging the competitiveness of U.S. high-tech products on the global market.

   “We’re very concerned about it,” Bill Reinsch, president of the National Foreign Trade Council and former BIS chief, told Shippers’ NewsWire. “(McCormick) more or less admitted that it’s unilateral.”

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