DUAL-USE AND MUNITIONS LIST EXPORT CONTROL PROCESSES AND IMPLEMENTATION AT THE DEPARTMENT

<DOC> [106 Senate Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:59453.wais] S. Hrg. 106-349 DUAL-USE AND MUNITIONS LIST EXPORT CONTROL PROCESSES AND IMPLEMENTATION AT THE DEPARTMENT OF ENERGY ======================================================================= HEARING BEFORE THE COMMITTEE ON GOVERNMENTAL AFFAIRS UNITED STATES SENATE ONE HUNDRED SIXTH CONGRESS FIRST SESSION __________ JUNE 10, 1999 __________ Printed for the use of the Committee on Governmental Affairs <snowflake> U.S. GOVERNMENT PRINTING OFFICE 59-453cc WASHINGTON : 2000 _______________________________________________________________________ For sale by the Superintendent of Documents, Congressional Sales Office U.S. Government Printing Office, Washington, DC 20402 COMMITTEE ON GOVERNMENTAL AFFAIRS FRED THOMPSON, Tennessee, Chairman WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut TED STEVENS, Alaska CARL LEVIN, Michigan SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey THAD COCHRAN, Mississippi MAX CLELAND, Georgia ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina JUDD GREGG, New Hampshire Hannah S. Sistare, Staff Director and Counsel Christopher A. Ford, Chief Investigative Counsel Curtis M. Silvers, Professional Staff Member Joyce A. Rechtschaffen, Minority Staff Director and Counsel Laurie Rubenstein, Minority Chief Counsel Darla D. Cassell, Administrative Clerk C O N T E N T S ------ Opening statements: Page Senator Thompson............................................. 1 Senator Lieberman............................................ 2 Senator Akaka................................................ 16 Senator Domenici............................................. 22 Witness Hon. Gregory H. Friedman, Inspector General, Department of Energy, accompanied by Sandra L. Schneider, Assistant Inspector General for Inspections, Department of Energy, and Alfred K. Walter, Office of the Inspector General, Department of Energy Testimony.................................................... 4 Prepared statement........................................... 29 Appendix Letter from Chairman Thompson, dated Aug. 26, 1998, sent to six agencies....................................................... 25 ``The Department of Energy's Export Licensing Process for Dual- Use and Munitions Commodities,'' Inspection Report, Department of Energy, Office of Inspector General, Office of Inspections, dated May 1999, submitted by Hon. Gregory H. Friedman, Inspector General, Department of Energy........................ 43 Memo for the Secretary, Department of Energy, from Hon. Gregory H. Friedman, Inspector General, Department of Energy, dated May 28, 1999....................................................... 98 Letter sent to Hon. Bill Richardson, Secretary, Department of Energy, from Chairman Thompson and Senator Lieberman, dated June 16, 1999, with answers to questions from the Department of Energy......................................................... 100 Letter to Hon. Gregory H. Friedman, Inspector General, Department of Energy, from Chairman Thompson, dated June 11, 1999, containing questions for the record submitted by Senator Akaka. 103 Letter from Hon. Gregory H. Friedman, Inspector General, Department of Energy, sent to Chairman Thompson, dated June 25, 1999, with answers to questions submitted by Senator Akaka..... 103 Letter from Ernie J. Montz, Under Secretary of Energy, Department of Energy, sent to Chairman Thompson, dated July 14, 1999, with supplemental answers to questions for the record submitted by Senator Akaka, from the Export Control Task Force, Department of Energy...................................................... 106 Letter sent to Hon. Gregory H. Friedman, Inspector General, Department of Energy, from Chairman Thompson, dated July 9, 1999, with answers to questions from the Department of Energy.. 110 DUAL-USE AND MUNITIONS LIST EXPORT CONTROL PROCESSES AND IMPLEMENTATION AT THE DEPARTMENT OF ENERGY ---------- THURSDAY, JUNE 10, 1999 U.S. Senate, Committee on Governmental Affairs, Washington, DC. The Committee met, pursuant to notice, at 10:05 a.m., in room SD-342, Dirksen Senate Office Building, Hon. Fred Thompson, Chairman of the Committee, presiding. Present: Senators Thompson, Voinovich, Domenici, Lieberman, and Akaka. OPENING STATEMENT OF CHAIRMAN THOMPSON Chairman Thompson. Let us come to order, please. In June of last year, the Committee heard testimony regarding a general breakdown of our licensing and control of dual-use items. As a result, I requested an agency review last August by the inspectors general of six different agencies. I asked them to review the licensing processes for dual-use and munitions commodities in an effort to determine what weaknesses still exist and what efforts we make to assess other countries' handling of these items after export. Dual-use items are those that have both civilian and military applications and munitions are those that have to do with strictly military applications. This was an update of a similar report that was issued by four of the agencies back in 1993, so this, in a real sense, is an update of these conclusions. But, obviously, since that request, a great deal of additional information about the problems of our weapons labs with regard to controlling information has surfaced. The six agencies from whom I requested this report are the Departments of Defense, Energy, Treasury, State, Commerce, and the Central Intelligence Agency. Each of these agencies plays a key role in controlling dual-use and munitions commodities.\1\ --------------------------------------------------------------------------- \1\ Chairman Thompson's letter, sent to six agencies, dated Aug. 26, 1998, appears in the Appendix on page 25. --------------------------------------------------------------------------- The first agency to complete their work is the Department of Energy, and because they have highlighted some particular problems within our nuclear weapons labs, they are here today to discuss their findings. We look forward to, of course, having the other agencies in the not-too-distant future. We are going to have individual reports from the inspectors general of these various agencies and a comprehensive report that tries to tie all of it together so we can look at it from a comprehensive standpoint. Senator Lieberman. OPENING STATEMENT OF SENATOR LIEBERMAN Senator Lieberman. Thanks, Mr. Chairman, for holding this hearing today which addresses a topic of genuine urgency and importance. The export control process is of vital interest to our national security and economic strength and the complex and serious nature of the issues demand the kind of careful and reasoned examination of the process that you requested the Inspectors General of Defense, Commerce, Treasury, State, CIA, and Energy to undertake. So I appreciate the lead that you have taken on this issue. Let me also thank the witnesses from the DOE Inspector General's office for their very good work in this report on their agency's export control procedures. The report, I think, will help place in context the important issues surrounding a wide range of national security concerns related to American trade and security policies, a matter that has obviously taken on renewed importance in light of the recent release of the Cox report, with its allegations that some American companies had business dealings with the PRC that circumvented or violated the current export control process. What makes this such a difficult area to deal with, I think, are the complex issues associated with export control. In some cases, controlling high-tech equipment that has both commercial and military application, so-called dual-use commodities, may not be easy. High-performance computers provide an excellent example of this, because technology that is considered sensitive today, or maybe in that case has been considered sensitive yesterday, may be in widespread commercial use today. In other words, it is sometimes going to be difficult to define precisely what technology should or should not, or realistically can or cannot be adequately controlled. A second difficulty in the crafting of our export control policies is that the United States may not be the only country that produces a specific controlled technology. As the authors of the Cox report have reminded us, other nations around the world may be quite willing to sell to countries that we would consider a possible security threat. So if we undertake unilateral action to place advanced technologies, such as satellites or supercomputers, on our restricted lists, we may in the end not prevent a potential adversary from obtaining it elsewhere, and, of course, we may also be doing some damage to American companies' international market positions. So the best course, though clearly not an easy course, is to arrive at a system of controls on a multilateral basis. There is also a larger question, I think, that we will need to consider as these hearings go on. The export control system focuses on products, but there are overall industrial capabilities in critical defense areas where we need to ensure that our companies continue to dominate or retain significant market share. So I think we have really got to think big about export controls and look at this larger question of whether the United States will retain industrial capability in the key defense needed technologies. The answer to the question will have an effect on whether we have a fully robust American defense or whether parts of that capacity emigrate abroad. In other words, we have a problem here not just of individual products, but of overall technologies. That, of course, does not mean we should relax our export controls. As the Cox report well reminded us, there is still a great deal of technology in commercial use that can have military applications and there are still many individuals and nations who we obviously cannot count on to use that technology in a manner that coincides with our national security interests. We must take care not to unwittingly provide technologies to nations which may use it to our detriment. So I think our challenge here is to create an export control regime that protects our national security interests around the world while recognizing that we will harm our national interest if we unduly curtail the legitimate export of American technology for commercial use. By telling us how the current process works, the information discussed in this report that we will hear testimony on today and the additional material we expect from the other inspectors general will assist in framing these issues, and I think in this, Mr. Chairman, this Committee has a unique opportunity under your leadership to really provide some information and, hopefully, reasoned judgment on these complicated issues. Before closing, let me just make a few brief comments on the specifics of the report that we are going to hear about today. Most importantly, I guess, I was heartened to read in it that, on a whole, from the perspective of this review of the DOE, the current control process is working. But, I must say, I am also disappointed with some of the report's findings, most significantly the apparent failure by DOE officials to follow proper procedures regarding obtaining licenses for visiting foreign scientists at our national labs. I understand that there are now efforts to remedy this problem, but it is very troubling to learn in this report, or to see here another example of insufficient focus at the labs on the protection of sensitive information. I will be interested in hearing from our witnesses this morning how serious they believe this problem to be and whether they have any reason to believe that sensitive information was, in fact, improperly transferred to parties who should not have seen it. Mr. Chairman, once again, I thank you for holding this hearing. I look forward this morning to a good, constructive discussion with the witnesses and I thank them for doing a first-rate job in their report. Chairman Thompson. Thank you very much. Senator Voinovich, did you have any opening comments? Senator Voinovich. No. I am looking forward to hearing the testimony. Chairman Thompson. Thank you very much. With us today is the Inspector General for the Department of Energy, Gregory Friedman. Accompanying him are Sandra Schneider and Alfred Walter, also from the Inspector General's office. Your report covers a number of areas and recommendations. I was particularly interested in your findings regarding the deemed export licensing process. I look forward to your explaining to us today what your findings and recommendations are, and particularly as they apply to scientists visiting our labs from other countries, so we appreciate your being with us today. Mr. Friedman, would you like to make an opening statement? I think we all read your report, but any summary statement you might want to make, we would appreciate it. TESTIMONY OF HON. GREGORY H. FRIEDMAN,\1\ INSPECTOR GENERAL, DEPARTMENT OF ENERGY, ACCOMPANIED BY SANDRA L. SCHNEIDER, ASSISTANT INSPECTOR GENERAL FOR INSPECTIONS, DEPARTMENT OF ENERGY, AND ALFRED K. WALTER, OFFICE OF THE INSPECTOR GENERAL, DEPARTMENT OF ENERGY Mr. Friedman. Thank you, Mr. Chairman. Mr. Chairman and Members of the Committee, I am pleased to be here today to testify on the Office of Inspector General's review of the Department of Energy's export licensing process for dual-use and munitions commodities. This review was part of an interagency effort by the Inspectors General of the Departments of Commerce, Defense, Energy, State, and Treasury and the Central Intelligence Agency. It was requested by the Chairman of this Committee as a follow-up to a similar IG review in 1993. --------------------------------------------------------------------------- \1\ The prepared statement of Mr. Friedman appears in the Appendix on page 29. --------------------------------------------------------------------------- I am joined today at the witness table by Sandra Schneider, the Assistant Inspector General for Inspections, and Alfred Walter, the Director of the Office of Management Operations of the Office of Inspections. They will also be available to respond to the Committee's questions concerning our review. In short, we determined that the Department of Energy's process for reviewing nuclear dual-use and munitions license applications generally appeared adequate, subject to certain concerns which I will discuss. Our review also identified indicators of possible problems with the licensing of deemed exports. Certain commodities and technologies are designated as dual-use. That is, they have both a civilian and military application. Some are also designated as nuclear dual-use, items controlled for nuclear nonproliferation purposes. For example, carbon fibers are used in the manufacture of tennis rackets, golf clubs, and fishing poles, yet they are also used in the manufacture of centrifuges for uranium enrichment activities. Another group of controlled commodities is designated as munitions, which are goods and technologies that have solely military uses, such as high explosives. The Nuclear Transfer and Supplier Policy Division of the Office of Nonproliferation and National Security is responsible for reviewing export license applications and recommending to the Departments of Commerce or State either approval or disapproval of an application. Procedures for processing dual- use license applications submitted to the Department of Commerce are clearly articulated in relevant regulations. However, there is no equivalent process for reviewing munitions cases referred by the State Department. As part of the interagency review, the Department of Commerce provided a statistically-based sample of 60 export license applications that it had provided to the Department of Energy in the first 6 months of 1998. We determined that all of the 60 cases in the sample were appropriately referred by the Department of Commerce. Our analysis of the 60 cases disclosed that the Proliferation Information Network System, commonly referred to as PINS, contained the required records concerning the recommendations and decisions on the 60 cases. The data in PINS was appropriately secured. PINS provided an adequate audit trail. The Department of Energy analysts were provided an adequate level of training. The escalation process for resolving agency disagreements regarding approval or disapproval of specific license applications appeared satisfactory, and there was no evidence that the Department of Energy analysts were being pressured improperly regarding their recommendations. We also reviewed whether the Department of Commerce was appropriately referring cases to the Department of Energy through an analysis of an additional random sample of 60 cases provided by the Department of Commerce not previously referred to the Department of Energy. Of the 60 cases not previously referred, a Nuclear Transfer and Supplier Policy Division analyst concluded that one case should have been referred, based on the involvement of a nuclear end user for the commodity. However, the Department of Commerce maintains that the license application was not required, therefore, neither was a referral. The Department of Energy has delegated to the Department of Commerce the authority to process export licenses for certain commodities without referring them to the Department of Energy. Based on the Department of Energy's review of a sample of the delegated cases, the Department of Energy officials determined that approximately 1 percent should have been referred but were not. The Department of Energy officials plan to rescind the delegations of authority to the Department of Commerce and determine whether they should be continued. The international traffic in arms regulations implemented by the State Department include the U.S. munitions list, which identifies munitions commodities that are subject to export controls. These items include those used in the design, development, or fabrication of nuclear weapons or nuclear explosive devices. The regulations do not require the State Department to refer license applications for munitions commodities to other agencies for review, and there is no formalized system for escalating and resolving differences among agencies. As a result, the Department of Energy's role in reviewing munitions license applications is not clear. Historically, the State Department has received few requests for export of nuclear-related commodities but routinely refers any such applications to the Department of Energy for review. The Department of Energy handles munitions license applications in the same manner as dual-use applications referred from the Department of Commerce. In our 1993 report on the Department of Energy's export license process, it contained 11 recommendations for corrective actions and some still need additional review and action. For example, an assessment of the adequacy of the staffing level for the Nuclear Transfer and Supplier Policy Division is required. Two other recommendations require the Department of Energy to coordinate with the Department of Commerce to obtain information regarding the shipment of commodities. The remaining recommendation requires the Department of Energy to coordinate with the State Department to obtain information regarding whether a license application was approved by the State Department for a munitions commodity and whether the commodity was actually shipped. This type of information for both Departments of Commerce and State would assist the Department of Energy analysts in their review of license applications for possible proliferation implications. I would now like to address our concerns with regard to deemed exports. During our review, there were indicators that the Department of Energy laboratories were not seeking export licenses for foreign nationals having access to certain unclassified information. According to the Export Administration Regulations, any release to a foreign national of technology or software that is subject to those regulations is, ``deemed to be an export'' to the home country of the foreign national. Our review included a relatively small judgmental sample of foreign national assignees from China, India, Iran, Iraq, and Russia who were involved for more than 30 days in unclassified activities at four the Department of Energy laboratories. We then identified several cases where an export license may have been required because of the information being accessed or the individual's employer. We found that laboratory guidance was not clear. We believe this stems from the fact that the Export Administration Regulations and internal the Department of Energy guidelines do not clearly explain when a deemed export license may be required. We also found the laboratories we surveyed generally rely on the hosts of the foreign national assignee to determine whether there are export concerns. We found several hosts who were not aware of or did not understand the requirements for deemed export licenses and several hosts who did not appear to exercise appropriately their host responsibilities. Our review also disclosed that there is no organization within the Department of Energy that has management responsibility for the deemed export license process. In response to our report and our recommendations, the Department has told us that it is clarifying its policies and has initiated a number of other corrective actions, including the establishment by the Under Secretary of an export control task force to review export control issues relating to the Department of Energy facilities, including deemed exports. Mr. Chairman, this concludes my testimony. My colleagues and I would be pleased to answer any questions you might have. Chairman Thompson. Thank you very much, Mr. Friedman, for a good presentation and a good report. We thank you and your entire staff for that. As I said earlier, this is going to be the first of several hearings on these subjects, and it is a subject that is going to be with us for a while. It has become very high profile. It is of obvious importance. The dual-use commodities matter, of course, is regulated primarily by the Export Administration Act. We are going to hear a lot about that. The Export Administration Act of 1979 expired in 1994, and its policies have been continued pursuant to executive order since that time, but Congress is going to take up the matter of the Export Administration Act now for the first time in a long time. There have been some amendments to it, but, basically, the 1979 framework is pretty much what we have been operating under. We are going to readdress that. One of the things we are dealing with here today is the body of rules and regulations that have been promulgated by the Commerce Department pursuant to the Export Administration Act, the Export Administration Regulations. So that is what we are dealing with. Here today, the Department of Energy primarily has to do with nuclear-related dual-use items. These items are referred to the Department of Energy by the Department of Commerce. I think, as everyone knows now, the Department of Commerce pretty much runs this show in terms of dual-use items and when matters come in, they make a determination as to what should be handed out to these other agencies. That is a gross oversimplification, but that is kind of the way it works. We are looking here at what is normally handed to the Department of Energy, and that is nuclear-related dual-use items. You mentioned some problems on the munitions side, and those are points well taken, I think. But as far as I am concerned, today, I want to talk primarily about the dual-use part regulated by the Department of Commerce as opposed to the munitions part that is handled primarily by the State Department. In your report, there is some good news, as Senator Lieberman pointed out. The responses, the timely responses, the training appears to be adequate. The escalation process as it goes through the potential appeal process, that seems to be working pretty well from the Department of Energy's standpoint. We will get into perhaps a little bit later what still is left over from the 1993 inquiry. As you know, in 1993, the Inspectors General conducted a similar review, and you did make some recommendations. One of the things we want to talk about is the extent to which those recommendations have been implemented. But it looks like, pretty much, most of them have. There are still some lingering problems in some other areas. One of the things you pointed out, of course, is the problem with deemed exports, and this is one of those things, of course, that makes your work so wonderful. Although lots of times we think that we are trying to ask you to come up with something that will, in effect, verify what we already believe, quite often, you come up with something that has not occurred to anybody. I do not know about anybody else, but I was not aware of the deemed export problem at all. You point out a problem here where foreign nationals are visiting our laboratories. As you know, we have had a policy now for some years, certainly in the 1990s, of pushing visitation programs between our labs, labs in China, and labs in Russia, and in connection with cooperative efforts in the nonproliferation area, which, I guess, in the wrong hands can turn to proliferation instead of nonproliferation. But all that has been going on and you highlight a problem where foreign nationals come and visit our labs and have access to dual-use or munitions information. As you point out, under the regulations, or under the law, we have all assumed that the law says that when these people have this kind of access, it is deemed to be an export. It is just like an export. I mean, you are giving them the information, in effect, and if you have got a problem with that, you have got just as big a problem with it by showing it to someone, giving them access for a month, maybe, or 2 months, as if you shipped it to them. So that is the basis of the situation. As I understand it, it is based on the nature of the information that they might be exposed to and it is also based on their citizenship. Obviously, some countries are more sensitive than others. It is also based on, perhaps, their employer--that is, who the foreign national might be working for. My understanding is that your methodology was that you looked at assignments, and the definition of assignments is when the foreign national is, let us say, at a lab for more than 30 days, is that correct? Mr. Friedman. That is correct. Chairman Thompson. Did you look at all assignments over a period of time? Mr. Friedman. No. We looked at a selected, small judgmental sample. Chairman Thompson. Do you know how many assignments there have been over the last year or 2 years or any particular period of time? Mr. Friedman. Mr. Chairman, at the four labs that we looked at, Sandia, Lawrence Livermore, Los Alamos, and Oak Ridge, according to the information that was provided to us by the Department, there were 3,100 assignments in 1998. But I want to caution you and the other members of the Committee that we think that number may not be accurate and we are working with the Department to try to figure out what the right number is. It is a significant number, and I also want to caution you that a large percentage of those were people from non-sensitive countries. Chairman Thompson. Could you elaborate on that a little further, as to why you think the information might be off and in what direction and to what extent? Mr. Friedman. Well, in the information that was provided to us, there were anomalies in terms of two of the labs in that the numbers are so low that it does not look reasonable. We will be trying to clarify that with the Department. So, therefore, we think the number may be understated. Chairman Thompson. I see. There are also those that are denominated as visitors, which, as I understand it, are those who come for 30 days or less. You only looked at the assignments and did not look at the visitors, is that correct? Mr. Friedman. That is correct. Chairman Thompson. Do you have any feel for how many visitors there have been over this same period of time to these four labs? Mr. Friedman. I would ask that Ms. Schneider respond to your question. Ms. Schneider. The numbers that Mr. Friedman referenced---- Senator Lieberman. Ms. Schneider, would you take the microphone and speak into it, please? Ms. Schneider. I am sorry. The number that Mr. Friedman references, the 3,200 number, is the best number that we have been able to identify from the Department at this point in time. However, they advise us that the laboratories may have substantially higher numbers of visitors and assignees which they have not been able to provide. Chairman Thompson. I had 3,100. Is it 3,100 or 3,200? Ms. Schneider. Actually, the number we got was closer to 3,200. Mr. Friedman. Thirty-two-hundred. Chairman Thompson. All right. Does that indicate both assignments and visitors, or just assignments? Mr. Friedman. No. Let me clarify. The visits, and I can total them very quickly, it is 953 at Oak Ridge, 525 at Lawrence Livermore, 88---- Chairman Thompson. A little bit slower. It is 953 at Oak Ridge---- Mr. Friedman. Five-hundred-twenty-five at Lawrence Livermore, 88 at Los Alamos, and 53 at Sandia. Senator Lieberman. And what is the period of time there? Mr. Friedman. In calendar year 1998. Senator Lieberman. Ninety-eight? Chairman Thompson. Are these assignments or visitors? Mr. Friedman. Those are visits. Chairman Thompson. Those are visits? Mr. Friedman. Yes. Chairman Thompson. What does that total to, do you know? Mr. Friedman. About 1,600. Chairman Thompson. About 1,700? You have 3,200 assignments, with the caveats that you indicated, and about 1,700 visitors? Mr. Friedman. Right. Chairman Thompson. For the four labs. Mr. Friedman. And I would attach the same caveat to the visitors, as well. Chairman Thompson. That same caveat, for 1998? Mr. Friedman. Correct. Chairman Thompson. All right. Is there any reason to believe that the numbers have substantially increased or decreased over the last few years, or would you think that would be a static number? Mr. Friedman. I really could not answer that. Chairman Thompson. You do not know that? All right. That gives us some sense of the level, and we might contrast that with the number of--let us see. The deemed export problem is a potential problem with visitors as well as assignments, perhaps not as big a problem, but potentially, I suppose, it is still a problem? Mr. Friedman. That is one of the points we have made, is that there is a lack of clarity in the procedures and the processes that govern that, Mr. Chairman. One of the issues that came up was there are people at the Department of Commerce who apparently have informed people at the Department of Energy that visitors, that is, people who are here 30 days or less, are not subject to those same requirements, and we are not positive that is the case. That is one of the issues that needs to be clarified. Chairman Thompson. Apparently in some people's mind, there is some question as to whether people on assignment come under the regulations. Mr. Friedman. Given the lack of clarity of the policy, yes, that is right. Chairman Thompson. So it is all a little hazy? Mr. Friedman. That is correct. Chairman Thompson. But in terms of a potential problem, a person there 30 days could be as much of a problem as a person there 35 days? Mr. Friedman. Absolutely. Chairman Thompson. All right. So we are dealing with 4,900 or almost 5,000 assignments and visitors in 1998. How many applications were there for deemed exports in 1998? Mr. Friedman. The information we were provided is that there were two applications. Chairman Thompson. Two? I think that pretty much speaks for itself. Mr. Friedman. Mr. Chairman, let me be very clear about that. The number of these individuals were from non-sensitive-- -- Chairman Thompson. I understand. Certainly, not all of them are a problem, or I am assuming that most of them are going to be people from countries that present less of an export-control problem. These are rough numbers, we understand. But we do know that there was in the neighborhood of 4,900 foreign nationals visiting our labs under some kind of program in 1998 and there were, apparently, two applications for deemed export licenses. Now, the nature of the problem, of course, has to do with-- well, there are several elements to it, but one of them certainly has to do with who is responsible. As you understand it, from your inquiry, the host to the foreign national has primarily been given the responsibility for complying with deemed export rules. Is that also a matter that is in some dispute, as to whether or not the host is the correct person to make the initial determination as to whether a license is needed, or is that pretty clear? Mr. Friedman. It is clear at the laboratory level. However, when you talk to the host, as our report points out, it is not clear to too many of the hosts. Chairman Thompson. So from a policy standpoint, as far as the Department of Energy is concerned, it is clear. Mr. Friedman. No. I do not believe it is codified in the Department of Energy's policies, but at the labs we visited, the hosts were the focal point and had responsibility in the lab policies for submitting export license applications. Chairman Thompson. All right. Taking it down to the laboratory level, then, as far as the administration of the lab is concerned, the people in charge would tell you that the hosts make that determination? Mr. Friedman. That is correct. Chairman Thompson. All right. But what you are saying is that when you get down and actually talk to the hosts it's a bit different. Describe the hosts. Who is the host? Mr. Friedman. The host is a laboratory employee who invites, perhaps, a foreign national to visit him or her at the laboratory to collaborate on some work that they may be doing. Chairman Thompson. What level of employee do you have to be in order to do this? I assume not any employee could invite a foreign national. Mr. Friedman. I really do not know the answer to that, Mr. Chairman. Chairman Thompson. All right. So what did you find when you went into these labs and actually talked to these hosts in terms of their carrying out this responsibility? Mr. Friedman. A number of them, and the report gives the specifics and Ms. Schneider can elaborate on this, but a number of them at all the labs simply did not understand, did not recognize, or did not realize that it was their responsibility to make that kind of a determination. Chairman Thompson. So they did not realize they were supposed to be making that determination? Mr. Friedman. That is correct. They were not educated, they were not trained, and they did not seek guidance in these cases. Chairman Thompson. Were they familiar with the deemed export concept? Mr. Friedman. Many were not. Chairman Thompson. They were not familiar with the concept of a deemed export? Mr. Friedman. I think that is correct. Chairman Thompson. They did not know they were supposed to be doing that sort of thing. Mr. Friedman. That is correct. Chairman Thompson. Then you pointed out that there was a problem with the Export Administration regulation, actually, that set this up. In looking at your report, as you say, ``A reader could conclude from the way it is worded that an export license is not required for research conducted by the Department of Energy laboratories and federally funded research and development centers. Virtually all of the Department of Energy laboratories have been designated as these centers. However, we conclude that a blanket exemption for work at these centers was probably not intended.'' I think that is probably an understatement. So, in other words, you could read this regulation and potentially conclude that all labs were exempted from this deemed export policy, even though I would assume, our nuclear weapons laboratories would be the primary place that you would want it to be applied. Mr. Friedman. Precisely. Chairman Thompson. That is a problem as far as the regulation is concerned. Then you pointed out a problem as far as the DOE order is concerned, and then the guidelines pursuant to the order. Could you characterize the ambiguity there in terms of guidance? Mr. Friedman. They are largely silent on the question of deemed exports. Chairman Thompson. I notice there is one reference here under the guidelines that says the private sector would need an export license. The language in the guidelines could give the impression that while the private sector would need an export license, that the Department of Energy would not. So if you talk about private-sector requirements, the implication might be that it pertains only to private-sector and not to government requirements. Mr. Friedman. That is correct. Chairman Thompson. Clearly, that is something that you brought to the attention of the appropriate authorities at the Department of Energy, and what has been their response to that? Mr. Friedman. We brought this to the attention of the Under Secretary in March. He was the Acting Deputy Secretary at the time. Senator Lieberman. Who was that? Mr. Friedman. Dr. Moniz. He immediately created a task force, which included the Offices of Intelligence, Counterintelligence, General Counsel, and Defense Programs, and they are attacking the problem as we speak. Chairman Thompson. All right. There are several more specifics I want to get into a little later, but I am going to relent right now. Senator Lieberman? Senator Lieberman. Thanks, Mr. Chairman. Let me just pursue the question of deemed exports for a few moments more. With all the concern lately about security at the DOE facilities, can you determine if any sensitive information might have been compromised by the apparent shortcomings in the deemed export license process? Mr. Friedman. We could not make that determination, Senator, and frankly, it was not part of our task. I am not sure we have the competence, to be honest with you. It requires a very keen sense of end use, end users, home countries, employers, and expertise that is really beyond us. Senator Lieberman. I appreciate that. The numbers are so startling that you have come up with. It looks like it is about a total of 5,000 in 1998, the 3,200 assignees and about 1,700 visitors, and out of that total, only two licenses applied for. It makes me concerned, obviously, about what might have been compromised. Am I correct in saying that, again, that these visiting foreign scientists presumably were not gaining access to information that was classified? Is that correct? Mr. Friedman. The context in which we are presenting this is that these were people who were here for unclassified visits and had access to only unclassified functions, matters, software, and technology. So we have no indication that they had access to classified material. Senator Lieberman. But, nonetheless, it has previously been determined that even the unclassified information might be sufficient to deem it an export and, therefore, require a license? Mr. Friedman. That is correct. Senator Lieberman. Your report does not, and understandably so, address the issue of whether American scientists traveling abroad might require an export license under certain circumstances, although, and as you follow the story unfolding around DOE and the labs, it is easy to see why similar concerns might be present for information that might be shared by DOE scientists as they travel abroad. I wonder what policies, if any, cover deemed exports by lab employees traveling overseas in meeting with foreign nationals. Mr. Friedman. Well, to be candid with you, Senator Lieberman, we did not pursue that matter. Again, it went beyond our charter in this particular review. But the general question of deemed exports does apply to U.S. citizens traveling to a number of foreign countries. Senator Lieberman. So as you read the current state of law and regulation, the deemed export license requirement covers not just contacts here in the U.S. but for our scientists traveling abroad? Mr. Friedman. That is correct. Senator Lieberman. That is something we may want to ask DOE to look at more closely. Let me just ask you to flesh out a little bit more, what is DOE now doing as far as you understand to establish more control over this deemed export license process? Mr. Friedman. We understand that the Department and the task force has been working with the Department of Commerce and the Department of State to try to clarify the requirements. It has been rewriting its own internal order to try to make it more clear to everyone, both Feds and to the contractor laboratory and personnel, what a deemed export is, when it is required, and when an export license is required to be sought. Those are the efforts that are now being undertaken. Senator Lieberman. Would you judge them at this point to be adequate or inadequate, or is it too early to say? Mr. Friedman. Well, it is too early to say, but I must say, Senator, that we are gratified by the reaction that has taken place. It was very prompt. We met within a week after we had first sent our memo to the Under Secretary with the task force, so that we think is a prompt response. Senator Lieberman. Do you think they are dealing also with this question of the hosts and informing the hosts of their responsibility under the---- Mr. Friedman. Yes. Senator Lieberman. You do? OK. Let me turn to the delegation of authority, which you have covered in the report, certain categories of applications that the Department of Energy has been allowing the Department of Commerce to handle without referring to the Department of Energy. Apparently, this procedure, which covers some 1,000 or 1,500 cases a year, is now being reevaluated by the Department of Energy. I gather that DOE analysts determined that 1 of the 60 randomly selected non-referred cases examined by your office should have been referred. Is that correct? Mr. Friedman. That is correct. Senator Lieberman. That was a situation involving the provision of software, hardware, and a Fortran compiler to a Russian nuclear power facility, which should have been referred, according to DOE, because it involved a nuclear end user, right? Mr. Friedman. That is correct. Senator Lieberman. How was this case resolved, to the best of your knowledge? Mr. Friedman. It has not been resolved. Senator Lieberman. It has not? Mr. Friedman. There is a difference between the Department of Energy and the Department of Commerce. At least to the best of my knowledge, at this point, it has not been resolved, and it is one of the issues we are going to be talking to the task force about. Senator Lieberman. Good. Does this suggest larger concerns that you have with the delegation of authority process? Mr. Friedman. As we indicated, the Department itself undertook a review of the cases that were subject to the delegation and came up with roughly a 1 percent error rate. Senator Lieberman. What prompted that reevaluation, as far as you know? Mr. Friedman. I am not sure I have that information right now. I suspect they were concerned about the way the delegations were being handled, as well. Senator Lieberman. Go ahead. Mr. Friedman. They came up with a 1 percent error rate, so they are taking a closer look at the delegation to see if that process is working properly or not. Senator Lieberman. So it is as yet unresolved, but they are continuing to work with the Department of Commerce on that? Mr. Friedman. That is right. Senator Lieberman. Let me ask you one or two questions about the munitions exports and State Department procedures. I gather that the State Department receives few requests for the export of nuclear weapons or explosive devices as components but refers certain of these cases to DOE and consults on others. While the procedures for the Department of Commerce's processing dual-use applications are clearly articulated in regulations, no comparable procedures exist for reviewing these munitions cases by the State Department. Your report determined that, in fact, there was no process in place, in contrast to the more formalized procedures on dual-use applications, for the resolution of the interagency disputes on munitions cases, and I wanted to ask you whether you think that that has proved to be a problem, and if so, what steps might be undertaken to improve the situation. Mr. Friedman. At this point, Senator, we cannot point to a problem. In all candor, this whole process is part of an intricate system, of course, for ensuring national security, and our concern is if there is a vulnerability in terms of the ability to reconcile differences of recommendations or judgment with regard to the Department of Energy or another department, that there be a formal escalation process to resolve those differences, as there is for dual-use commodities. Senator Lieberman. I thank you for that. Let me ask you just one or two final policy questions. Your examination of the export control processes employed by DOE, based on that examination and other relevant agencies, I wonder what recommendations regarding some of the larger policies that guide these decisions that you might have. For instance, does the system we have in place, to the best of your knowledge, appear to adequately assure that all national security and commercial interests are taken into account? Can you reach a judgment on that? Mr. Friedman. Our overall judgment, in terms of the evaluation process itself, is that it was adequate in virtually all respects, so that we are comfortable with that, based on the sampling that we have done. Senator Lieberman. Do you have any knowledge from your own experience--I know that COCOM expired and there are other attempts at multilateral cooperation, but they are not, to my knowledge or in my opinion, very successful--do you have any judgment about the multilateral regimes with voluntary restraints set by individual governments that are in effect now, and do you have any thoughts about this dilemma that we have that we can decide not to sell and we can protect our own secrets, as it were, but other industrialized nations can go ahead and effectively do business and proliferate? Mr. Friedman. We really have not thought that through. Senator Lieberman. OK. Thanks very much. It is a good report, and thanks for your responses. Chairman Thompson. Thank you. Senator Voinovich. Senator Voinovich. We have various Committees in Congress that are involved in this and there are two aspects of it. One is that some things got out that should not have and people are concerned about it. The other aspect is, what are we going to do to tighten this up? I am interested in knowing, from your observations, has everyone got the message? Are you satisfied that the effort being made by the administration in terms of dealing with this problem of tightening it up is adequate, and if you do not think it is adequate, what other things do you think they should be doing so they can come back to Congress in a month or 2 months. The point I am making is that there are a lot of people in Congress that want to write an administrative policy that is going to take care of the situation, and as a former mayor and governor, I do not think that is the way to get the job done. You have a problem, you go to the administration and you say it is a problem. We know it is a problem. You know it is a problem. What are you doing to solve it? Come back to us with your recommendations. From your perspective, do they get it and are they moving forward with it and are we going to come up with something that is really going to tighten this thing up so that we do not have what we have had in the past? Mr. Friedman. Senator, at this point, we are gratified with the action that the Department has taken. It is our intent to go back at some point in the future to take another look at this issue, to make sure that the fix that has been implemented is, in fact, addressing the issues. That is the only assurance that I can give you at this point in time. Senator Voinovich. The task force that is in place, is that task force just in the Department of Energy, or is it involving the other agencies? Mr. Friedman. It is a Department of Energy task force, but they are interacting and coordinating with State and Commerce Departments and I am comfortable that they are doing the right things at this point. Senator Voinovich. Is there a facilitator or a process in place to get everybody's input into this? Mr. Friedman. The task force has the imprimatur of the Under Secretary and certainly one of the leaders is a deputy chief of staff, so I think it has the right people to get the right people involved. Senator Voinovich. In your testimony, on page 9, you note that the Nuclear Transfer and Supplier Policy Division of the Office of Nonproliferation and National Security may be understaffed. How big a shortfall are you talking about? Mr. Friedman. We did not do a formal staffing study, so I cannot answer that question specifically. I think that is the Department's responsibility because they have taken on a number of additional responsibilities within that division and I think they need to be adequately staffed to evaluate the numerous export license applications that come in. Senator Voinovich. Mr. Chairman, I would suggest that we ask the question about what they are doing, if they have a staff problem, what are they doing to remedy the problem there. I would be interested in getting a report back on that. You also note that the Department's intelligence capabilities are not being fully utilized in the processing of export cases. What is the Department doing to address that situation? Mr. Friedman. Actually, the situation, we understand, has been largely remedied, with the advent of PDD-61, the Presidential Decision Directive, as a result of which, the Department has established the Offices of Intelligence and Counterintelligence as separate stand-alone offices within the Department. We think, in large measure, that issue has been addressed. Senator Voinovich. From your observations, we have, what, 5,000 visitors of one sort or another, and you say most of them are from countries where we have not any problem, but is there anyplace where, before somebody can become a host, that it has to be approved by someone? Do you know? Mr. Friedman. I am not here formally representing the Department, but the Secretary, under his sweeping reorganization, has established an Office of Foreign Visits and Assignments Policy Office, and that is the first time that such an office will have been established, as I understand it, certainly in recent history, and they will be, as I understand it, addressing the issues that you are referring to. So there will be a centralized accountability office within the Department to address those issues. Senator Voinovich. Mr. Chairman, again, I think that it would be interesting to get a report back from them on just exactly who is going to do it, what the procedures are, and the standards that they are going to set. Also, I think that they should be recommending a whole new education policy where they decide that somebody can be a host and what the responsibilities are of that host. Chairman Thompson. We will be expecting to hear from the Department of Energy on that. Anything further? Senator Voinovich. Nothing more. Chairman Thompson. Senator Akaka. OPENING STATEMENT OF SENATOR AKAKA Senator Akaka. Thank you very much, Mr. Chairman. I have a statement and I ask that it be placed in the record. Chairman Thompson. It will be made a part of the record. [The prepared statement of Senator Akaka follows:] PREPARED STATEMENT OF SENATOR AKAKA Mr. Chairman, I am pleased to join you in welcoming the witnesses today from the Department of Energy's Office of the Inspector General to discuss their report on ``Inspection of the Department of Energy's Export Licensing Process or Dual-Use and Munitions Commodities.'' I thank you, Mr. Chairman, for requesting the Inspectors General of the Departments of Energy, Defense, State, Commerce, Treasury and the Central Intelligence Agency to conduct an expanded review of their agency's export licensing processes. This review ill flush out the distressing problems with our export control licensing process raised by Dr. Peter Leitner, senior strategic trade advisor with the Department of Defense's Agency of Defense Threat Reduction, in his June 1998 testimony before this Committee. It is important to note that the Inspector General's review of the Department of Energy's export licensing process was relatively positive. His recommendations for improving the transparency and efficiency in the process were accepted by the Energy Department's Nuclear Transfer and Supplier Policy Division. The report criticizes the lack of procedures, or understanding of the procedures, for licensing foreign nationals working at the national weapons laboratories who may be exposed to controlled dual-use and munitions technical data. This is referred to as a ``deemed export'' because the United States views the transfer of controlled technology to a foreign national as an export to his or her home country. It is very evident that the Department of Energy and the national weapons laboratories do not understand how to determine what constitutes controlled technical data for which an export license is necessary. We cannot tell from the IG's report whether or not additional losses of dual use and critical military technology occurred from the failure to screen foreign visitors. Rather than dwelling on the failures of the past, we need to focus on improving the screening process. This hearing is an excellent first step in that direction. I am pleased, however, that the report concluded that licensing analysts have not been forced to change their recommendations on license applications as Dr. Leitner reported happened at the Defense Department. I am also pleased to learn that DOE's computer system for processing license applications was found to contain complete, accurate and consistent information with Commerce's database with the minor exception of a few cases, apparently caused by a glitch in the Commerce Department's computer system. There is larger issue at stake here: How do we maintain the free flow of ideas needed to maintain our technical edge without sacrificing our national security. In the area of exports, I hope this Committee will examine even more closely how to maintain a choke-hold on critical dual use exports in an environment of rapid technological revolution. I welcome our witnesses once again and I thank them for taking the time to testify before us this morning. Senator Akaka. Mr. Chairman, I also want to add my welcome to the panel this morning and to point out that I felt that the Inspector General's review of the Department of Energy's export licensing process was relatively positive. But there are problems, and I want to mention that some of the problems with DOE was because of the export licensing process. One problem was a lack of clarity in what constitutes a deemed export and confusion about who is responsible for determining when a deemed export license is required. So one of my questions is, who is responsible for determining when a deemed export license is required? Is this DOE or the Department of Commerce, or DOE in cooperation in the Department of Commerce? Mr. Friedman. It is within the Department of Energy family, Senator. Senator Akaka. So within the Department of Energy? Mr. Friedman. Yes. Senator Akaka. So it is not done in cooperation with the Department of Commerce? Mr. Friedman. In terms of the determination that an application needs to be submitted, it is the Department of Energy responsibility. Senator Akaka. How many deemed export licenses have been granted for the lab-to-lab programs? Mr. Friedman. I do not have that information, Senator. Senator Akaka. Have any deemed export licenses been requested for the U.S.-China lab-to-lab program, do you know? Mr. Friedman. I do not have information to that specificity. Senator Akaka. Do you know whether any foreign students who are attending U.S. universities working on lab-sponsored programs have been included in this? Mr. Friedman. I am afraid I am striking out, Senator. I do not know the answer to that question, either. I apologize. Senator Akaka. Very well. Mr. Chairman, thank you. I am very interested in export licensing and I hope maybe we can discuss this later. Thank you. Chairman Thompson. Thank you. Thank you very much. I was looking at some of the details of your report here. At Los Alamos, they told you that they were allowing their hosts to make the threshold deemed export determination, but you say, however, 9 of the 14 hosts who were interviewed contended that they were not responsible for making this determination, right? Mr. Friedman. That is correct. Chairman Thompson. At Lawrence Livermore, they indicated that hosts had received memoranda regarding their responsibilities, but two of the eight hosts you interviewed said they had never received any guidance on possible export control issues relating to foreign nationals they were hosting, correct? Mr. Friedman. Correct. Chairman Thompson. At Los Alamos, a security specialist said the hosts were made aware of their responsibilities, but only 7 of the 14 hosts that were interviewed said that they had received guidance. At Oak Ridge, one Oak Ridge contractor said that he was listed as the host of a Chinese national assignee but that in reality, another Chinese national was the actual host. Mr. Friedman. Correct. Chairman Thompson. So you had a Chinese national acting as the host of another Chinese national? Mr. Friedman. That is correct. Chairman Thompson. Getting to these numbers, I think I can see where you think you may have some under-reporting here. It seems to me like that Lawrence Livermore, Los Alamos, and Sandia should all be in the same ballpark. Is that kind of the assumption that you would operate under? Mr. Friedman. Yes, sir. Chairman Thompson. And yet, Lawrence Livermore reports over 500 and Los Alamos and Sandia only reports 88 and 53. Mr. Friedman. In fairness to the office that gave us this information, they indicate that they are trying to improve the quality of their data, if you will. They also indicate that there may have been some direction from the Office of Counterintelligence related to restricting the publication of some of the information of the foreign nationals. So there may be some reasons for these anomalies, Senator---- Chairman Thompson. That would be pretty ironic, would it not? The information is so sensitive, you cannot give the number of foreign nationals, but we have absolutely no clue as to any deemed export policy and what the foreign nationals are doing while they are there. How are we going to follow up on those numbers? Are you going to follow up on that? Mr. Friedman. We are going to follow up on the numbers, yes. Chairman Thompson. Let us know what you come up with. Oak Ridge, for example, is a science lab. I can see why their number of scientific visitors would be pretty high. Lawrence Livermore might have a little less than that, substantially less, really. But the reported figures from these other two, I mean, clearly are low, and those are weapons facilities. We need to know what the numbers are there. If they do not have accurate numbers or cannot get their arms around their numbers, as to just the gross numbers of foreign nationals coming there, that is a hell of a problem in and of itself. So we will not throw any more rocks until we know that it is justified, but this is something on which we need some follow-up. Another area, too. You talked about some areas where the Department of Energy delegates its authority back to the Department of Commerce, basically, when the commodity is not intended for a nuclear end user. My concern there is all the information that we have come across now shows that some of these countries are extremely deceptive as to their end user controls. They refuse to let us have any control over end users, and some of our own manufacturers, or sellers, I think, in this country have tacitly participated in such deceptions in order to make the sales. We send it to these countries and we do not know what happens to it. Now, we are learning bit by bit that, in many cases, we have been deceived. Some of these dual-use items are supposed to go to one facility and they go to another facility, a nuclear-related facility or a military facility. Who makes this end user analysis? Who makes this kind of determination as to the potential problem there? If they send it to the Department of Energy, you have your PINS database there where they collect all this information. It is a sophisticated computer program. They have a great deal of the information, as I understand it, with regard to all export license applications, and presumably, if someone would use it properly, you would be able not only to tell something about the cumulative effect of these exports to these various countries, but also to help with regard to potential proliferation issues and the end-user problem. But if you are going to delegate such research to the Department of Commerce, which is trying to sell the stuff, it looks to me like you have a potential problem there. What do you think? Mr. Friedman. I will give you my judgment, as best I can, but before I do that, they have thought through this question of the delegations of authority and there is a basis for them, and if I can, let me refer to Mr. Walter to describe that process, and then I will give you my best judgment on that. Chairman Thompson. Mr. Walter. Mr. Walter. Under Executive Order 12981, agencies, including the Department, are authorized to review any license application. The Executive Order also provides the agency the authority to notify the Department of Commerce of the types of applications that they do not need to see. DOE has provided the Department of Commerce delegations of authority for certain things, for example, items going to the Nuclear Suppliers' Group. Also commodities not intended for nuclear end use and end users. So, basically, DOE has said, we want to see all items that involve nuclear end use or end users, but there are these other items that, for whatever reason, we do not need to see. One of the things you mentioned was that DOE, through its PIN system, has information, historical information, on export license applications. This is limited to only applications that the Department of Energy has received or that have been referred to the Department of Energy by the Department of Commerce, not the entire universe of export license applications. So in the Department of Energy's process of---- Chairman Thompson. But even there, I understand that PINS does not know what the disposition of any of these license applications are, either. That is another potential problem. Mr. Walter. That is correct, and if the Department of Energy would have that information, that would help in its proliferation review. Chairman Thompson. All right. Mr. Friedman, do you want to follow up on that? Mr. Friedman. I was hoping to buy more time. [Laughter.] Mr. Friedman. I think, given the current environment, clearly, this could be a problem. I mean, I am not going to---- Chairman Thompson. Is this something that has been discussed or analyzed? Have you talked to the Department of Energy, or to the Department of Commerce, in particular, about that particular problem? What I am concerned about, of course, is an export to a sensitive country but for some ostensible or alleged commercial use. Well, we know that we have sent some goods to China for commercial airline purposes that have been diverted for military-related purposes. That is what I am trying to get at. If you have not had that discussion with the Department of Energy or the Department of Commerce---- Mr. Friedman. Well, we have had the discussion with the Department of Energy, and what the Department of Energy has told us is that they are going to withdraw the delegations of authority to review the process. Chairman Thompson. So they do not know what they do not know. So we are talking about a process here, not just what the Department of Energy knows. I think it is a matter for consideration by the Department of Energy and the Department of Commerce. Senator Lieberman. Senator Lieberman. Thanks, Mr. Chairman. I was struck in the report--and I suppose this is because we are coming after a day of closed meetings with people from Justice and the FBI and others about the ongoing investigation that has resulted from the Cox report and its preliminaries, but I was struck to note that in this policy, that is, the existing DOE policy, that U.S. citizens must serve as hosts of visiting U.S. foreign nationals, is not very well known. You cite one case not followed as it should be where there was a visiting Chinese scientist for whom an American citizen was listed as the host, but, in fact, the visiting Chinese scientist was going to work with and did work with a fellow Chinese national. And this was a Chinese national who was a temporary resident of the United States, I presume. Mr. Friedman. I do not have his precise category. Senator Lieberman. But he was a---- Mr. Friedman. The laboratory policy was, though, that a U.S. citizen be the host. So, in effect, there was a surrogate host, because the Chinese national could not serve in that capacity. Senator Lieberman. But everyone knew that the visiting Chinese scientist was working with the Chinese national. Mr. Friedman. I do not know if everyone knew, Senator, but, I mean, the people involved certainly knew. Senator Lieberman. Right. Then I gather another host stated that his name is officially assigned as the host for many visitors, but he does not actually know them all. Mr. Friedman. Correct. Senator Lieberman. Do I assume that as part of the DOE review, that they are going to focus in on, to the best of your knowledge, on this question, along with others? Mr. Friedman. Yes. I am informed that they are going to be looking at the question of educating the hosts as to their responsibilities and ensuring that they can carry out those responsibilities. Yesterday, the Secretary's advisory board issued a number of recommendations concerning the foreign assignee and visitors' program. One of the recommendations concerned forcing or directing the laboratory directors to get more directly involved in this program, and that may be a quality check in this whole process. It may be a useful quality check. Senator Lieberman. Yes. Perhaps I should ask you, this is a very sensitive area, because while I know in some cases of security concern there is a particular concern about what might be called ethnic espionage, on the other hand, obviously, in the best traditions of our country, we do not want to begin to be automatically suspicious of people who are not U.S. citizens. So I suppose the more important lapse here is the failure to carry out the program of deemed export licenses than the question of the citizenship of the host. Did you make a recommendation on that? Do you think that is an important part of this security policy, which is to say that a U.S. citizen would have to be the host for a foreign visitor? Mr. Friedman. We did not make a direct recommendation on that point. Senator Lieberman. Do you have an opinion on that? Mr. Friedman. I think that would be a wise policy judgment. Senator Lieberman. In other words, you think the current policy should continue, but be enforced? Mr. Friedman. I think the policy should be that a U.S. citizen should be the host. That assumes, Senator, that the hosts continue to play a pivotal role in determining whether deemed export licenses ought to be sought. Senator Lieberman. Right. Mr. Friedman. If that continues, if they are the focal point, I think you need that kind of assurance, or something similar to that. There may be exceptions, and I have not necessarily thought that through entirely, either. Senator Lieberman. Again, I think you have done a superb job, and I guess in light of all our questions about the areas of our worry, we should come back and say for the record that, basically, you have said that the DOE system is working, and where it is not working, the Department has now organized a review which, hopefully, will make it work better. But I think on the deemed export licenses, particularly, you have produced some information that is very unsettling and part of the general sense that I think a lot of us are receiving that our guard was down here. Even when we had a good policy, which we seem to have had in the DOE policy on deemed export licenses, it was not being implemented at all. Five-thousand visitors and assignees and only two licenses applied for is a pretty shocking incongruence or discontinuity in the statistics that you provided. I am sure the Chairman and I will be asking the Department to respond to that, and I will be particularly interested in the other subject we talked about, which is whether anything is being done in regard to deemed export licenses for our scientists when they travel abroad. Again, we do not want to stop that, but if we think there is merit to this policy that the transfer of information is effectively an export, or can be, and it requires a license and the kind of equal protection, almost, then it ought to relate to transfers of information that occur here as well as those that occur abroad. I hope that we will continue to pursue it and push DOE on those questions. Thanks very much, again, to all of you for the quality of your work here. Chairman Thompson. Thank you very much. Just on that point, is it your opinion that the laws and the regulations now require our foreign travelers there, if they impart the right kind of information, to obtain an export license? Mr. Friedman. Yes. Chairman Thompson. So that two number would include our people abroad, also? Mr. Friedman. I am not sure of that. Chairman Thompson. All right. Thank you. Senator Domenici. OPENING STATEMENT OF SENATOR DOMENICI Senator Domenici. I came principally because I wanted to congratulate you on your report and I strongly concur with the deemed export issue. I also think it needs to be carefully considered. I would encourage the Department to develop procedures that do not stifle the international scientific interactions between the laboratory scientists and foreign scientists that remain essential for the laboratories to remain on the cutting edge. I think procedures should be devised at the labs and the Department that will allow rapid identification of any potential export issues, and wherever possible, I would encourage that entire facilities or technologies be evaluated for export consideration and placed on approved lists for action. Sometimes, long delays are good for no one in this respect. Could I ask a question with reference to scientists overseas versus visitors to this country. As part of your evaluation, would you be able to determine whether the effort to obtain information from American scientists who go to China is more severe or more pronounced than what we know about Chinese coming here and gathering information? I have an impression that American scientists are really pushed when they go to China and other countries for information that they might have and that they have to be very well trained in order to avoid that kind of pressure. Did you have any observations on that? Mr. Friedman. We do not, Senator Domenici. That is way beyond the scope of what we looked at. Senator Domenici. Let me just say to the Senators, I have very reliable information that there is far more pressure on American scientists who go to China and speak the language because they are of the same culture and educated at the same schools and because there is such a fraternity of scientists on nuclear matters, including the whole hierarchy of the Chinese scientists who build their nuclear weapons and do what they do to push it forward. Their American-educated leader, has a Ph.D. from UCLA or University of California, and taught here in America. Chairman Thompson. I think we have discovered, too, or at least our law enforcement officers have made it more clear, I believe, that some countries as a part of their information gathering techniques, I am talking about improper information gathering things, that we would consider improper--that is a fundamental part of there approach to use the attempted debriefing of our scientists abroad. Senator Domenici. Frankly, we can talk about technologies and making sure we do not get the wrong ones exported. But, we have got to be awfully careful that our scientific minds are not transferring the information too. Frequently, such transfers of ideas are much more desirable buying something from the commercial market that might be further changed, and other applied. That is not the subject of this hearing, but it is the subject of your very serious investigation about what we could do to help with this matter. I just want to thank you for the excellent job you have done. Thank you, Mr. Chairman. Chairman Thompson. Thank you. I just, finally, want to ask you to give us an assessment of any problems lingering from the 1993 era. You did an analysis in 1993. You highlighted some problems. They have set about addressing most of them, I think. But what is there left on the table? Where are we not making as much progress as we should be? Mr. Friedman. Senator, let me ask Mr. Walter to address that question. Chairman Thompson. All right. Mr. Walter. Basically, there are two areas, I think, that we need some additional work on, and they involve interagency actions. They involve Department of Commerce and Department of State. What we had requested in our 1993 report was that the Department of Energy get with the Departments of Commerce and State to obtain what is referred to as ``final disposition'' of export cases. Final disposition includes not only whether the license application was approved or denied, but also whether the item was purchased and/or shipped. We talked about this briefly earlier, where, from the Department of Commerce, we are currently getting information on approval/denial of license applications, but we are still not getting information regarding whether the item was actually purchased or shipped. This information would be helpful to our analysts for their proliferation reviews. Chairman Thompson. How does that work? If it is denied, how can it be shipped? Mr. Walter. If a license application was not approved, the item should not be shipped. Chairman Thompson. So if it is approved, the assumption is that it is shipped, but that might not necessarily be valid? Is that the point? Mr. Walter. Yes. We understand now that there is a process in place at the Department of Commerce to try to get this information from Customs and to be able to send it out electronically to DOE. But the system that they would send it to DOE under has not been completed yet. Now, from the standpoint of the State Department, we are not getting either piece of information. We do not know whether, in fact, the munitions application, for example, was approved or disapproved and we also do not know, if it was approved, whether, in fact, it was purchased and/or shipped, and again, that would be helpful for DOE from a proliferation standpoint. Senator Lieberman. Mr. Chairman, if I may, am I right that the information that we are not getting adequately now would be critical to our own effort to track possible proliferation of security items? Mr. Walter. I would say it would be very helpful. I could not characterize it as critical, but it would be very helpful. Chairman Thompson. Thank you very much. We will be certainly hearing from the Department of Energy on these things as we proceed along. The Department of Commerce, too, for that matter. But thank you very much. This is a valuable contribution. I think none of us certainly want to see the destruction of our visitors' program. We understand that there is very much to be gained all around by scientists talking to each other. You cannot build a fortress around your country or even all your technology. But when we let our guard down so substantially, when we go to sleep, when we see that our most sensitive technologies are being taken and that we are participating in allowing them to be taken under various guises, whether it be espionage or exports or what not, we are actually harming the visitation program. That is the kind of thing that will destroy it, unless we plug some of these holes that we have clearly got now. By identifying them, I think that is the first step and we appreciate your work. Thank you very much. Mr. Friedman. Thank you very much. Chairman Thompson. We are adjourned. 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BILL RICHARDSON, SECRETARY, DEPARTMENT OF ENERGY, FROM CHAIRMAN THOMPSON AND SENATOR LIEBERMAN Committee on Governmental Affairs, U.S. Senate, Washington, DC. June 16, 1999 The Honorable Bill Richardson Secretary, Department of Energy 1000 Independence Avenue, S.W. Washington, DC 20585 Dear Secretary Richardson: On June 10, 1999, the Senate Committee on Governmental Affairs held a hearing on the Department of Energy Inspector General's report regarding the Department's Export Control process. We were pleased to learn that the Inspector General determined that, for the most part, the Department's process for reviewing nuclear dual-use and munitions commodities appears to be adequate. We were troubled, however, by the IG's finding that the Department appears not to be complying with applicable rules that require certain foreign nationals visiting DOE's nuclear labs to obtain licenses before gaining access to controlled technology or information. According to the testimony of Inspector General Friedman, there may have been as many as 3,200 foreign national assignees staying more than 30 days at DOE labs in 1998. He also indicated that over 1,600 foreign nationals may have visited the labs for shorter periods during that year. In that same year, only two deemed export license applications were filed regarding visitors to the DOE labs. Although there may be legitimate reasons why many of these visitors did not require licenses during their stay at the labs, the stark contrast between the number of visitors and the number of license applications, combined with other information the IG provided at the hearing, raises serious questions about DOE's compliance with export control requirements. In order to help us more accurately assess the extent to which this truly is a problem, we would appreciate your providing some additional information. Specifically: (1) LPlease provide an exact number of visitors and assignees to each DOE nuclear lab during calendar year 1998. (2) LIn each of these categories, how many foreign nationals were from countries to which we restrict the release of sensitive technical information? Which countries were involved? Please provide a breakdown of the number of visitors and assignees from each country named. (3) LHow many of these individuals had access to controlled information or technology? (4) LHow many export licenses did DOE apply for on behalf of these visitors and assignees? (5) LWith respect to the foreign nationals described in response to Question 2, were all of these assignees and visitors working under the supervision of U.S. citizens? If not, who did supervise them? Did the absence of supervision by a U.S. national comply with applicable requirements? (6) LHas the Department attempted to determine whether those individuals may have used any controlled information or technology to which they had access at the DOE labs when they returned to their home country? (7) LHow many DOE employees traveled abroad in 1998 to work with nationals of countries to which we restrict the release of sensitive technical information? Did these DOE employees' interactions with the foreign nationals involve the exchange of any information or technology that would require a license under our export control laws? How many of these individuals received export licenses? (8) LAre DOE employees with access to controlled information and technology counseled before trips abroad regarding the need to protect controlled information? Finally, we understand that after the IG provided a memo to the Under Secretary regarding the deemed export issue in March, the Department formed an Export Control Task Force to address issues related to the Agency's export control process, including the Department's treatment of deemed exports. Please advise what steps that are being taken to (1) define oversight responsibility for deemed exports, (2) clarify the Department's guidance on visits and assignments of foreign nationals, and (3) ensure that guidance is understood and adhered to by Department personnel. Also please provide an indication of when completion of these initiatives is expected. We appreciate your prompt attention to these important questions. Please contact Christopher Ford of the Committee's Majority staff at (202) 224-4751 and Laurie Rubenstein of the Minority staff at (202) 224-2627 to discuss a time frame for your response. Sincerely, Joseph I. Lieberman Ranking Minority Member Fred Thompson Chairman __________ ANSWERS TO QUESTIONS FROM THE DEPARTMENT OF ENERGY Question 1: Please provide an exact number of visitors and assignees to each DOE nuclear lab during calendar year 1998. Answer: Total: 11,136. Los Alamos National Laboratory (LANL) 3,325 Lawrence Livermore National Laboratory (LLNL) 2,624 Oak Ridge National Laboratory (ORNL) 2,684 Sandia National Laboratory (SNL) 2,503 Question 2: In each of these categories, how many foreign nationals were from countries to which we restrict the release of sensitive technical information? Which countries were involved? Please provide a breakdown of the number of visitors and assignees from each country named. Answer: Controls on transfers of technology differ from country to country, based upon the reason for controlling the technology. Some export controls are applicable to all countries, others applicable only to a select few countries. For example, technology associated with machine tools, which is controlled for nuclear proliferation reasons, is restricted to a different group of countries than technology associated with production of kevlar jackets, which are controlled for anti- terrorism reasons. Some technologies, such as munitions items, require a license to any country. We are providing the information below with respect to visitors and assignees from countries on DOE's sensitive country list. A total of 2,876 national visitors and assignees held citizenship (not necessarily residence) from countries on DOE's sensitive country list, and these visits and assignments involved the following laboratories: LANL 1,063 LLNL 525 ORNL 741 SNL 547 DOE Order 1240.2b, Unclassified Visits and Assignments by Foreign Nationals, which was in effect during the time of these visits, defines a foreign national as ``any person who is not a U.S. National or is a stateless person. An Immigrant Alien is considered a foreign national for the purposes of this Order.'' Therefore, in 1998, immigrant aliens were considered foreign nationals and are included in these numbers. For example, at Lawrence Livermore National Laboratory, of 155 sensitive country national assignees, 80 were in resident alien status; and of 370 sensitive country national visitors, they estimate about a quarter of them (approximately 90) were in resident alien status in 1998. Many of the visits were short term in nature and involved one day tours of unclassified areas, arms control conferences, and in some instances, job interviews. For example, the North Korean visit occurred at Sandia National Laboratories' Cooperative Monitoring Center under the aegis of DOE and the State Department to help promote North/South Korea arms control dialogue. The Iraqi visits occurred at Oak Ridge National Laboratory and Sandia. The Oak Ridge visit was by a permanent resident alien, employed by a private firm in Wisconsin, who was seeking employment at the lab. The Sandia visitor (an Iraqi-born Hungarian who is listed as Iraqi because of his place of birth) was part of a University of New Mexico class visiting an unclassified microelectronics facility. The breakdown of the number of visitors and assignees from each country is as follows: India 511, Iran 43, Iraq 2, Israel 127, North Korea 1, Pakistan 8, Peoples' Republic of China 930, and Russian Federation 1,131. Other sensitive countries 123.* * Other sensitive countries include: Algeria, Armenia, Azerbaijan, Belarus, Cuba, Georgia, Kazakstan, Kyrgyzstan, Libya, Moldova, Sudan, Syria, Taiwan, Tajikistan, Ukraine, and Uzbekistan. Question 3 and 4: How many of these individuals had access to controlled information or technology? How many export licenses did DOE apply for on behalf of these visitors and assignees? Answer: The majority of interactions between DOE laboratory scientists and foreign nationals occur in the realm of public domain information or fundamental research. Such interactions fall outside the scope of U.S. export controls. Additionally, a transfer of controlled technology to a foreign national requires a license only when the technology is export controlled to the home country of the foreign national. It is for this reason DOE has seen very few requests for export licenses, and the number of those compares favorably with private industry and other U.S. Government agency practices. According to our records, these four laboratories have applied for export licenses for transfers of commodities and technology under DOE programs, but no applications for individual validated export licenses were submitted directly in connection with visits and assignments of foreign nationals to the weapons laboratories in 1998. For example, the DOE Materials Protection, Control, and Accounting (MPC&A) Program, a cooperative program with the Russian Federation to ensure the secure storage of their special nuclear material, operated under a special comprehensive export license granted by the Department of Commerce (DOC) in 1997, valid for a four year period. The license grants authorization for transfers of certain controlled technologies to the participating Russian institutes regardless of whether the transfer occurs here or abroad. Question 5: With respect to the foreign nationals described in response to Question 2, were all of these assignees and visitors working under the supervision of U.S. citizens? If not, who did supervise them? Did the absence of supervision by a U.S. national comply with applicable requirements? Answer: The hosts of record for all of the visitors/assignees were U.S. citizens. However, as identified in previous reports to Congress, the Department needs to strengthen its policy and procedures regarding hosts. Under the new policy statement and Notice, to be released later this month, all hosts must be a DOE or DOE contractor employee. A visitor cannot be a host. Additionally, a sensitive country foreign national cannot be a host of another sensitive country foreign national. Program reviews shall be conducted periodically by the Office of Foreign Visits and Assignments Policy and the Office of Counterintelligence to assess policy effectiveness and identify improvement areas. In addition, independent oversight of the overall performance of the Foreign Visits and Assignments Program shall be the responsibility of the Office of Independent Oversight and Performance Assurance. Question 6: Has the Department attempted to determine whether those individuals may have used any controlled information or technology to which they had access at the DOE labs when they returned to their home country? Answer: As we have responded above, only a very small number of foreign national visitors/assignees have had access to controlled information or technology. The Department does not have the ability to determine what foreign nationals do once they return home. However, by careful review and screening prior to a visit or assignment, we believe we can minimize any risks associated with foreign nationals access to the DOE laboratories. Question 7: How many DOE employees traveled abroad in 1998 to work with nationals of countries to which we restrict the release of sensitive technical information? Did these DOE employees' interactions with the foreign nationals involve the exchange of any information or technology that would require a license under our export control laws? How many of these individuals received export licenses? Answer: Routinely, DOE employees and DOE contractor employees travel to foreign countries, including sensitive countries, in support of diverse programs and initiatives. In many instances, these interactions pertain to policy and scientific exchanges, including basic research, and international conferences that crosscut the broad spectrum of activities within the Department and do not involve sensitive information requiring special controls. Such travel allows the Department to leverage its resources against those of other countries, helps to reduce duplication of effort in the international arena, and allows the United States to coordinate and influence policies and actions by other countries. Official foreign travel by DOE employees and DOE contractor employees, including those working at the nuclear laboratories, requires approval by the sponsoring program office. In the event the employee is traveling to a designated ``sensitive country'' and/or discussing a ``sensitive subject,'' prior to approval by the sponsoring program office, additional reviews and concurrence are required. While no export licenses have been granted, during the review/concurrence process DOE has denied travel requests and required modifications to joint activities and presentations to comply with the export control regulations. Question 8: Are DOE employees with access to controlled information and technology counseled before trips abroad regarding the need to protect controlled information? Answer: Yes. DOE employees traveling to sensitive countries are required to have a security briefing prior to departure. __________ LETTER TO HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF ENERGY, FROM CHAIRMAN THOMPSON Committee on Governmental Affairs, U.S. Senate, Washington, DC. June 11, 1999 The Honorable Gregory H. Friedman Inspector General United States Department of Energy 1000 Independence Avenue, S.W. Washington, DC 20585 Dear Mr. Friedman: Enclosed are additional questions from the hearing which was held on June 10, 1999 regarding the Dual-Use and Munitions List Export Control Processes and Implementation at the Department of Energy that have been directed to you and submitted for the record by Senator Akaka. In order to ensure a complete hearing record, I would appreciate it if you would return your written responses to these questions to the Committee on Governmental Affairs by Friday, June 25, 1999. If you have any questions, please contact Christopher Ford of the Committee staff at (202) 224-4751. thank you for your kind attention to this request. Sincerely, Fred Thompson, Chairman __________ LETTER FROM HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF ENERGY, TO CHAIRMAN THOMPSON Department of Energy, Washington, DC. June 25, 1999 The Hon. Fred Thompson, Chairman, Committee on Governmental Affairs, U.S. Senate, Washington, DC. Dear Mr. Chairman: This is in response to your letter of June 11, 1999, which contained questions from Senator Daniel Akaka concerning the hearing that was held on June 10, 1999, regarding the dual-use and munitions export control processes at the Department of Energy. Your letter was received by this office on June 23, 1999. Several of the questions are within the scope of our review. Our responses are enclosed. The remaining questions most appropriately can be answered by the Department's Export Control Task Force. Therefore, we have referred these questions to Ms. Rebecca Gaghen, who heads the Department's Export Control Task Force, and requested she respond directly to you. Please contact me if I can be of further assistance. Sincerely, Gregory H. Friedman Inspector General Enclosure QUESTIONS AND ANSWERS FROM HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF ENERGY, SUBMITTED BY SENATOR AKAKA In your report, you stated the State Department does not have an established interagency fora to discuss routine munitions license applications and that there is no process for escalating disputed applications. You concluded that this issue should be addressed. Question 1: What steps have DOE taken with the State Department to rectify these issues? Answer: This question was referred to the Department's Export Control Task Force for response. You indicated that the NTSP Division (Nuclear Transfer and Supplier Policy Division) believes the dual-use dispute resolution escalation process works adequately. Question 2: Do you believe the process could be improved and if so, how? Answer: Our review of the Department's export licensing process did not identify any major concerns with the escalation process. A concern was raised regarding the level of the Department's representation at meetings of the Advisory Committee for Export Policy. However, this concern was subsequently addressed by the Under Secretary in his April 21, 1999, letter to the Department of Commerce on this issue. I understand the Commerce Department, including concurrence from the Departments of State and Defense, granted DOE a special comprehensive license (SCL) authorizing the export of dual-use nuclear controlled items to certain entities in Russian and the Newly Independent States. A SCL authorizes the export of specific categories of items to pre-approved end-users for pre-approved end-uses without the requirement to obtain individual licenses for each export order or shipment. The SCL requires, however, the implementation of an Internal Control Program (ICP) to ensure compliance with the license conditions and administrative and screening elements. Question 3: Did you conduct a review of this license? If not, do you plan to conduct a review of the Internal Control Program (ICP) for this sensitive license to ensure DOE is adequately implementing the ICP requirements? Answer: We did not review the special comprehensive license, which was not within the scope of our review of the Department's export licensing process. We are continuing to evaluate potential export control issues for possible future reviews. The ICP is one of the issues which we shall consider in this process. Your review of the 60 dual-use ``non-transferred'' cases indicated that Commerce should have referred one (1) case to DOE because the end- user was a nuclear end-user. Your report further notes that Commerce ultimately returned the application without action. Question 4: Do you know why Commerce returned the application without action? Answer: The nuclear end-user was a Russian nuclear power plant. It was included in an agreement on safeguards between the USSR and the International Atomic Energy Agency (IAEA) in 1985 and was on the 1997 list of Russian/USSR IAEA-safeguarded nuclear facilities. As a safeguarded civilian nuclear power plant, Commerce determined that it is not subject to Section 744.2 of the Export Administration Regulations and the license was returned without action to the applicant. The Department of Energy, we are informed, is not in agreement with the Commerce position. We have recommended that Energy resolve this matter with the responsible Department of Commerce officials. In your 1993 report, you recommended an assessment of the staffing level in the NTSP Division. In this report you also recommend a review of the staffing levels. Question 5: What is the status of this review? Answer: This question was referred to the Department's Export Control Task Force for response. Question 6: In your opinion, how many employees should the NTSP Division have to properly fulfill its licensing function? Answer: We are not in a position to determine the appropriate level of staffing necessary to perform export license review activities. As was evident from the information elicited at the June 23 hearing on this matter, there are a substantial number of export license applications to be reviewed by the Department. We concluded that this workload justifies our recommendation that the Department conduct a review of the NTSP Division workload to determine the appropriate staffing level. Based upon your 1993 report recommendation and subsequent information you received, you requested your Office of General Counsel to opine on a possible conflict between Section 12(c) of the Export Administration Act of 1979 regarding the protection of company proprietary information and the 1981 Executive Order 12333 regarding the ``United States Intelligence Activities.'' Question 7: What are the specific issues that may be in conflict? Answer: A concern was raised by the Department's Senior Intelligence Officer (SIO) that he was not able to appropriately exercise his intelligence oversight responsibilities under Executive Order 12333. Reportedly, the SIO was unable to access information regarding intelligence analyses that were conducted in support of the export license review process. This lack of access was purportedly the result of protections afforded to export control information by Section 12(c). Question 8: What is the status of your General Counsel's review of this issue? Answer: This question was referred to the Department's Export Control Task Force for response. I believe it is critical for NTSP Division analysts to have access to raw intelligence data to complete their analysis of license applications. Question 9: What measures has the Assistant Secretary for Nonproliferation and National Security taken with the Office of Intelligence to rectify this critical problem? Answer: This question was referred to the Department's Export Control Task Force for response. Question 10: The IG Report recommends redrafting the policy on foreign visits and drafting new guidance for hosting foreign nationals, including new guidelines for deemed exports. <bullet> LWho is responsible for determining when a deemed export license is required? <bullet> LIs the U.S.-Russia Lab-to-Lab program subject to these requirements? <bullet> LWhat is the Lab-to-Lab program's record of requesting deemed export licenses? <bullet> LHow many deemed export licenses have been granted for the Lab-to-Lab program? <bullet> LHave any deemed export license [sic] been requested for the U.S.-China Lab-to-Lab program? <bullet> LHave any deemed export licenses been granted for Chinese nationals associated with this program? <bullet> LWhat are the criteria for requesting deemed export licenses for sensitive countries? <bullet> LHas DOE requested any deemed licenses for exports of sensitive information to India? Answer: This question was referred to the Department's Export Control Task Force for response. Question 11: The IG Report does not address foreign students. <bullet> LAre foreign students who are attending U.S. universities working on lab-sponsored projects? Answer: During our review, we determined that there were a number of foreign national students, including post-doctoral students, at our laboratories. <bullet> LAre any of those projects sensitive in nature? Are any such projects related to DOE's Stockpile Stewardship program? Answer: This question was referred to the Department's Export Control Task Force for response. <bullet> LAre background checks done on foreign students from U.S. universities who are working on lab-sponsored research? Answer: This question was referred to the Department's Export Control Task Force for response. <bullet> LHave such students been granted security clearances? Answer: This question was referred to the Department's Export Control Task Force for response. <bullet> LWill the IG recommendations be applied to foreign students? Answer: Foreign students at the laboratories are subject to the same export licensing requirements as foreign nationals. Accordingly, any recommendation regarding foreign nationals will include foreign students at the laboratories. LETTER FROM ERNIE J. MONIZ, UNDER SECRETARY OF ENERGY, DEPARTMENT OF ENERGY, TO CHAIRMAN THOMPSON Department of Energy, Washington, DC. July 14, 1999 The Hon. Fred Thompson, Chairman, Senate Committee on Governmental Affairs, U.S. Senate, Washington, DC 20510 Dear Mr. Chairman: On June 10, 1999 Gregory Friedman, Inspector General of the Department of Energy, testified regarding the Dual-Use and Munitions List Export Control Processes and Implementation at the Department of Energy. Enclosed are answers to questions 1, 5, 8, 9, 10 and 11, submitted for the record by Senator Akaka. The remainder of the questions, 2, 3, 4, 6 and 7, has been submitted to you in a separate letter from the Inspector General's Office. If we can be of further assistance, please have your staff contact John C. Angell, Assistant Secretary for Congressional and Intergovernmental Affairs. Sincerely, Ernie J. Moniz Enclosures SUPPLEMENTAL ANSWERS TO QUESTIONS SUBMITTED BY SENATOR AKAKA, FROM THE EXPORT CONTROL TASK FORCE, DEPARTMENT OF ENERGY Question 1: In your report, you stated the State Department does not have an established interagency fora to discuss routine munitions license applications and that there is no process for escalating disputed applications. You concluded that this issue should be addressed. What steps have DOE taken with the State Department to rectify these issues? Answer: The Assistant Secretary for Nonproliferation and National Security (NN) has signed a letter to the Assistant Secretary for Political Military Affairs at the Department of State requesting the convening of an interagency meeting to initiate discussions regarding the need for an interagency dispute resolution process for escalating munitions license applications under dispute between reviewing agencies. Question 5: In your 1993 report, you recommended an assessment of the staffing level in the NTSP Division. In this report you also recommend a review of staffing levels. What is the status of this review? Answer: The review is ongoing. The Department of Energy (DOE) is going over staffing levels for the Nuclear Transfer and Supplier Policy (NTSP) Division in conjunction with its overall annual budget preparation and submission process. The issue is also receiving the attention of a special Secretarial task force on export controls. The assignment of Federal personnel to any given function is dependent upon several factors, including available funding and overall allotment of Full Time Equivalent (FTE) slots provided to DOE. Staffing levels for the Nuclear Transfer and Supplier Policy (NTSP) Division are developed through a periodic review of existing, as well as anticipated requirements. Future requirements are identified at the division level and coordinated with the Director, Office of Arms Control and Nonproliferation, and the Assistant Secretary for Nonproliferation and National Security (NN) to ensure that NTSP's staffing needs are considered along with those of other NN offices and DOE at large. Ultimately, NTSP's final allocation is dependent upon the number of Federal slots available to the Department, and the prioritization of staffing needs by the Department. Question 8: Based upon your 1993 report recommendation and subsequent information you received, you requested your Office of General Counsel to opine on a possible conflict between Section 12(c) of the Export Administration Act of 1979 regarding the protection of company proprietary information and the 1981 Executive Order 12333 regarding the ``United States Intelligence Activities.'' What is the status of your General Counsel's review of this issue? Answer: The Office of the General Counsel has concluded that there is no conflict and the basis for that conclusion will be described in a memorandum the Office of the General Counsel expects to complete no later than this month. Question 9: I believe it is critical for the NTSP Division analysts to have access to raw intelligence data to complete their analysis of license applications. What measures has the Assistant Secretary for Nonproliferation and National Security taken with the Office of Intelligence to rectify this critical problem? Answer: The NTSP has been discussing with the current Director of the Office of Intelligence arrangements for greater access to Intelligence Community resources for its export control analysts. In the meantime, the Office of Intelligence has established a permanent liaison position with the NTSP to provide relevant intelligence analyses on an as-needed basis, until a more permanent solution can be implemented. Question 10: The IG Report recommends redrafting the policy of foreign visits and drafting new guidance for hosting foreign nationals, including new guidelines for deemed exports. Question 10A: Who is responsible for determining when a deemed export license is required? Answer: Responsibility for export control compliance is shared among DOE headquarters, laboratory and facility managers, and program officials. By the end of the month, the Department will have a new policy with respect to unclassified foreign national visits and assignments and DOE foreign travel. The new policy will ensure that the consideration of the need for an export license is part of the visits and assignments and foreign travel approval processes. The Secretary of Energy has undertaken steps to ensure that ``deemed export'' controls are made an integral part of the approval process for foreign national visits and assignments throughout the DOE complex. The Under Secretary of Energy has chartered an export control task force with representatives from the Secretary's office and relevant headquarters program offices. This group has reviewed, and will continue to review, export control issues relating to DOE facilities, including the issue of deemed exports. The task force has updated the DOE Guidelines on Export Control and Nonproliferation, which provides guidance on when an export license may be required. Specialized training programs are planned for laboratory personnel who participate in collaborative programs with foreign nationals. An active, flexible communications channel between headquarters and export control experts in the field will be established to ensure all DOE facilities receive appropriate guidance on export control policies. Question 10B: Is the U.S.-Russia Lab-to-Lab program subject to these requirements? Answer: The U.S.-Russia Materials Protection, Control, and Accounting (MPC&A) program and all other DOE cooperative programs with Russia and the Newly Independent States are subject to U.S. export control requirements. To ensure compliance with export control regulations, the MPC&A program has hired two staff members and detailed one Department of Commerce (DOC) employee to DOE headquarters to assist in acquiring export control licenses from DOC. Other DOE cooperative programs also have taken steps to ensure that all initiatives are reviewed by export control experts and that all appropriate export licenses are obtained. Question 10C: What is the Lab-to-Lab program's record of requesting deemed export licenses? Answer: In large part, the MPC&A Program operates under an international cooperative license granted by the Department of Commerce (DOC) in 1997, valid for a four-year period and can be extended for one additional four-year period with the concurrence of DOC. The license grants authorization for transfers of certain controlled technologies to participating Russian institutes. More than 560 requests to use this license have been approved by DOC. This covers approximately 17,000 items and totals more than $20M in goods. Question 10D: How many deemed export licenses have been granted for the Lab-to-Lab program? Answer: Approximately 250 individual validated licenses (IVLs) were granted by the Department of Commerce, authorizing the transfer of both commodities and technologies to specified Russian institutes under the DOE Lab-to-Lab programs. There is no special application for a ``deemed export'' license; the IVLs obtained by the programs authorize the transfer of technology to the Russian institute regardless of whether the transfer occurs here or abroad. Question 10E: Have any deemed export licenses been requested for the U.S.-China Lab-to-Lab program? Question 10F: Have any deemed export licenses been granted for Chinese nationals associated with this program? Answers: Steps have been taken to ensure that Chinese assignees to the National Laboratories working on arms control and nonproliferation projects of mutual interest, under the U.S.-China Arms Control Exchange program, formerly known as U.S.-China Lab-to-Lab program, such as atmospheric modeling, are given access only to software or other technologies that do not require export licenses. DOE laboratories applied for only a small number of licenses from the Department of Commerce-- seven were equipment-related; none would have fallen into the realm of deemed exports. In keeping with legal and political constraints on the U.S. side, all activities were unclassified and avoided any technical discussion of nuclear weapons matters. They focused instead on exclusively non-sensitive public domain information, which was limited to arms control, nonproliferation (including export controls), and safeguards. The U.S.-China Arms Control Exchange program was recognized to be sensitive from the outset because of the institutions involved, and special measures were taken to oversee and control the proposed U.S.-China interactions to preclude discussion of any sensitive subject material or inappropriate transfer of information or technology. All of the interactions under the program were closely monitored by the U.S. Government through an Interagency Contact Group, chaired by the Department of State (DOS), which was organized to review plans, specific activities, progress, and in some cases, complete briefing packages. The Group included the Departments of Energy (DOE), State (DOS), and Defense (DOD), the former Arms Control and Disarmament Agency (ACDA), the National Security Council (NSC) and the Intelligence Community (IC). Question 10G: What are the criteria for requesting deemed export licenses for sensitive countries? Answer: The majority of interactions between DOE laboratory scientists and foreign nationals occur in the realm of public domain information and fundamental research, and therefore, fall outside the scope of U.S. export controls. When a DOE program has been determined to involve a transfer of technology not in the public domain, the proposed transfer undergoes a thorough review by export control experts at the DOE laboratory or facility to determine if the technology requires an export license to the country involved. A transfer of controlled technology to a foreign national requires a license only when the technology is export-controlled to the home country of the foreign national. The process used to determine which interactions require an export license application includes the following steps: <bullet> LCareful subject matter review within the U.S. laboratories by the program manager at each laboratory; <bullet> LReview by classification experts and the Export Control Coordinator at the laboratory/facility; and <bullet> LReview by DOC upon request of the Export Control Coordinator at the laboratories. Additionally, other steps in the review process can include: <bullet> LSubsequent review by DOE personnel overseeing the program; <bullet> LReview by DOE Headquarters of any sensitive-country foreign travel and foreign visits and assignments; and <bullet> LFinal review by an interagency group (such as that overseeing the China Arms Control Exchange Program). Question 10H: Has DOE requested any deemed licenses for exports of sensitive information to India? Answer: According to our records, DOE has not applied for an export license to transfer any sensitive information to India. DOE currently has no active programs of cooperation with India that involve the transfer of export-controlled technology. After the 1998 nuclear tests and in keeping with U.S. sanctions policy, DOE suspended all programs of cooperation with India and Pakistan. Question 11A: The IG Report does not address foreign students. Are foreign students who are attending U.S. universities working on lab- sponsored projects? Question 11B: Are any of those projects sensitive in nature? Question 11C: Are any such projects related to DOE's Stockpile Stewardship program? Answers: Much like the Department of Defense, the Department of Energy and its laboratories maintain relationships with universities. These relationships make significant contributions to our scientific research. Foreign students attending U.S. universities may be involved in unclassified research projects related to the Stockpile Stewardship program. Foreign students on-site access to DOE labs are subject to the same restricted security measures as other foreign scientists access. Question 11D: Are background checks done on foreign students from U.S. universities who are working on lab-sponsored research? Answer: Background, or ``indices'' checks, are conducted on: (1) all foreign nationals from sensitive countries, and (2) all foreign nationals from any country who are to visit a secure area or discuss a sensitive technology while at DOE. These checks are completed by both the FBI and CIA, and the results are routed through the Office of Counterintelligence to the requesting facility. Personnel security background investigations, on the other hand, are only done in instances where an individual is an applicant for a DOE access authorization (personnel security clearance). Question 11E: Have such students been granted security clearances? Answer: All requests for access authorization for any foreign national are processed through the Office of Security Affairs. In order for a foreign national to be granted access authorization, there must be a bilateral agreement between the United States and the individual's country of citizenship which covers the specific information that would be released to the individual. Such bilateral agreements exist only with the United Kingdom and France. In addition, the program office having responsibility for the information to be released must attest that the individual is uniquely qualified for the work and that there are no U.S. citizens available having the necessary skills, knowledge, and ability to do the work. There are no more than 12 foreign nationals holding DOE access authorization in the entire DOE complex. These are all high- level professionals, most from the United Kingdom and Canada. None of the foreign nationals holding DOE access authorization are from sensitive countries. LETTER TO HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF ENERGY, FROM CHAIRMAN THOMPSON Committee on Governmental Affairs, U.S. Senate, Washington, DC. July 9, 1999 The Honorable Gregory H. Friedman Inspector General United States Department of Energy 1000 Independence Avenue, S.W. Washington, DC 20585 Dear Mr. Friedman: During the hearing on June 10, 1999 regarding the Dual-Use and Munitions List Export Control Processes and Implementation at the Department of Energy, you were requested to provide the Committee with the following items for the official record: 1. LChairman Thompson: Follow up on the precise number of foreign nationals visiting the Oak Ridge, Lawrence Livermore, Los Alamos and Sandia Laboratories; 2. LSenator Voinovich: Report on the adequacy of staffing at the Nuclear Transfer and Supplier Policy Division of the Office of Nonproliferation and National Security at the Department of Energy and what that office is doing to remedy any problems in this regard; and 3. LSenator Voinovich: Report on current and planned Energy Department policies regarding who may host a foreign national visitor to a national laboratory and what responsibilities such hosts have. In order to ensure a complete hearing record, I would appreciate it if you would return your written responses to these requests to the Committee on Governmental Affairs by Friday, August 20, 1999. If you have any questions, please contact Christopher Ford of the Committee staff at (202) 224-4751. Thank you for your kind attention to this request. Sincerely, Fred Thompson Chairman ANSWERS TO QUESTIONS FROM HON. GREGORY H. FRIEDMAN, INSPECTOR GENERAL, DEPARTMENT OF ENERGY Question 2: According to the Inspector General's testimony, Energy's intelligence capabilities are not being fully utilized in the processing of export cases. What measures are being taken to ensure that Energy's intelligence capabilities are fully utilized? Answer: Since the initial IG's report on the Department's Export Control activities, collaboration between the Nuclear Transfer and Supplier Policy (NTSP) Division and the Office of Intelligence has been strengthened. This effort is helping to ensure that export control analysts have ready access to intelligence information required to make informed decisions on export applications. Because of these changes, NTSP now has more flexibility to utilize the Field Intelligence Elements at the National Laboratories, including Lawrence Livermore National Laboratory to provide independent assessments of end- users on export license applications. The NTSP is discussing with the current Director of the Office of Intelligence arrangements to provide NTSP export control analysts greater access to Intelligence Community resources. Until a more permanent solution can be implemented, the Office of Intelligence has established a permanent liaison position with the NTSP to provide relevant intelligence analyses on an as- needed basis. Question 3: According to the Inspector General's testimony, the Nuclear Transfer and Supplier Policy Division in the Office of Nonproliferation and National Security may not be adequately staffed. Question 3A: How is the staffing level determine? Answer: The assignment of Federal personnel to any given function is dependent upon several factors, including available funding and overall allotment of Full Time Equivalent (FTE) slots provided to the Department. DOE determines staffing levels for the Nuclear Transfer and Supplier Policy (NTSP) Division through a periodic review of existing and anticipated requirements. Future requirements are identified at the division level and coordinated with the Director, Office of Arms Control and Nonproliferation, and with the Assistant Secretary for National Security and Nonproliferation (NN) to ensure that NTSP's staffing needs are considered along with those of other NN offices and the Department of Energy at large. Ultimately, NTSP's final allocation is dependent upon the number of Federal slots available to the Department, and the prioritization of staffing needs by the Department. Question 3B: What is the staff shortfall? Answer: Given the importance that the Department attaches to export control and the increasing responsibilities of the NTSP Division, the Department is committed to ensuring that the Division has the resources necessary to carry out its mission. The Secretarial task force on export control is currently reviewing options for strengthening DOE's implementation of these requirements and is assessing, among other matters, the need for increased staff in the NTSP Division and at the National Laboratories. Question 3C: Are there vacant positions, do additional positions need to be authorized, or both? Answer: The NTSP Division currently has one position that is vacant, for which recruitment is currently under way. The possible need for additional positions is a subject of the on- going review of Departmental export control activities noted above. Question 3D: What measures are being taken to address this? Answer: The Department is reviewing NTSP's staffing needs in conjunction with the work of the Secretarial task force to strengthen DOE export control efforts. In addition, possible future staff increases are being considered as part of the development of the FY 2001 budget. In the meantime, one laboratory technical expert has been assigned to Headquarters to provide on-sight technical support to DOE's export license review activities. Question 3E: How long will it be before the division is adequately staffed? Answer: The mission of the division is rapidly expanding. Several of the contributing factors include: (1) implementation of a major export control initiative designed to address full compliance with all export control laws in the DOE complex; (2) increased responsibility related to the review of Department of Commerce dual-use licenses; (3) the re-enactment of the Export Administration Act; (4) declassification and decommissioning activities within the DOE complex; and (5) future multilateral activities. Once the on-going review of staffing needs is completed, any recruiting of new personnel that may be approved could be completed in a matter of months. Question 4: According to the Inspector General's testimony, there appears to be widespread noncompliance with regulations requiring foreign nationals visiting the labs to obtain deemed export licenses prior to having access to unclassified, but sensitive, information. Apparently, internal Energy guidelines are unclear. As a result, Energy hosts were not aware of, or did not understand, the regulations, and several hosts did not appear to appropriately exercise their host responsibilities. The Inspector General did note that your new security initiative includes establishing the Office of Foreign Visits and Policy Assignments (``Office'') within the Office of Security Affairs. Please explain the process through which the Office will approve foreign scientists for visits to or work at the labs, and how the Office will determine the level of access granted to foreign scientists. Please outline how the Office will control the access of foreign scientists, who are either visiting or working at the national labs, to sensitive unclassified or classified information for which a deemed export license would be required? What are the criteria for an Energy employee to be a host to a foreign scientist? Will this Office issue guidance to employees regarding the responsibilities of being a host? Please explain the process. Will this Office conduct oversight to hosts to ensure that regulations are being followed? Please explain the process. Answer: Revision of DOE's existing Foreign Visits and Assignments policy is currently underway. The Department of Energy is continuing to improve its efforts to establish an effective policy, including the development of a systematic approach to the DOE review and approval process, as well as providing a mechanism for management accountability. This effort also will include the improvement of standard DOE-wide operating procedures and the implementation of education and training programs for management officials and hosts. DOE expects to complete the process shortly at which time we will more fully respond to the questions posed here. <all>ns posed here.

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