Weapons of Mass Destruction (WMD)

Mr. Chairman and Members of the Subcommittee, thank you for this opportunity to discuss the efforts underway to negotiate a Protocol to the Biological Weapons Convention (BWC), and particularly the potential impact such a Protocol could have on U.S. industry. The Department of Commerce fully supports efforts to reduce the threat posed by biological weapons. A greater degree of monitoring and transparency with respect to activities at biological facilities throughout the world is of potential benefit not only to governments and the general public, but to private industry as well.

The U.S. is the world leader in pharmaceuticals and bio-technology. Next to its intellectual property, industry's greatest asset is its hard-earned reputation for integrity and product quality. It is an industry devoted to sustaining and enhancing life, not threatening it. So an international Protocol that would help confirm that U.S. commercial facilities have no involvement whatsoever with biological weapons would be a valuable asset for U.S. industry, especially in the event of an outbreak of disease or other evidence alleging biological weapons development or use. For that reason, we have had considerable cooperation from industry in the form of advice and technical assistance regarding both their recommendations and their concerns about a biological weapons Protocol.

As Ambassador Mahley has explained, it is not our goal to duplicate the chemical weapons inspection regime for biological sites. Significant differences between chemical and biological agents and their industrial uses make the Chemical Weapons Convention (CWC) regime less than a perfect model for a BWC Protocol. That is particularly apparent in the industrial setting. One major challenge of these negotiations is that other governments -- including many with little or no industry at stake -- continue to press for CWC-like provisions and requirements.

The U.S. position in the BWC negotiations, which Ambassador Mahley has described, fully reflects the differences between CWC and BWC. To better appreciate those differences and the U.S. position, let me briefly describe our experience to date with U.S. industrial inspections under the CWC and the lessons we have learned that are applicable to a BWC Protocol.

For industry, the CWC regime has two basic components: declarations and inspections. Under the CWC Implementation Act (P.L. 105-277), every U.S. facility that produces, processes or consumes internationally listed weapons-usable or precursor chemicals above specific volume thresholds must submit a declaration to the Department of Commerce. The amount of information required in the declaration varies with the type of chemical involved. Responses to certain questions are automatically classified as confidential business information (CBI) and must be protected by both the U.S. Government and the Organization for the Prohibition of Chemical Weapons (OPCW). Facilities may also indicate whether any CBI is contained elsewhere in the declaration. Once the Department of Commerce has completed a quality control review, these declarations are compiled and relayed to the OPCW. The OPCW determines which facilities have surpassed the thresholds for inspection, and is entitled to conduct inspections of those sites.

Commerce published the Chemical Weapons Convention Regulations in December 1999 and called for submission of declarations by March 30, 2000. We have received a total of 3,076 declarations and export reports to date. Of the 138 sites which declared production, processing or consumption of a listed chemical controlled under the CWC, approximately 81 are subject to international inspection. In addition, 640 plant sites involved in the production of discrete organic chemicals are also subject to inspection, although only a few will actually be selected by the OPCW for such inspections.

As of May 2000, more than 230 sites have been inspected in the other 136 countries that have ratified the CWC. Since May, when the U.S. completed its implementation of the CWC, ten inspections have been conducted in this country. On average, we are receiving a notification of inspection approximately every other week. We anticipate a total of 18 inspections through December 2000, and up to 36 inspections in calendar year 2001.

Typically, the international inspection team consists of four inspectors, who divide into sub-teams to carry out specific tasks. Depending on the type of chemical (or chemicals) involved, these tasks may include a physical tour of the plant site, a comprehensive review of the records used to create the site's declaration, and negotiation of a draft facility agreement to guide the conduct of future inspections at that site. Inspectors attempt to demonstrate that the chemical in question has not been diverted for nefarious purposes. In order to do that, the inspection team generally conducts what is known as a "mass balance" analysis of the declared activity, tracing the chemical's path through the facility from receipt to production, processing or consumption, to shipment and inventory. This process is intended to "balance" the inputs of raw materials with the outputs of finished products. In addition, the inspectors have the right to request samples or formal interviews of personnel, although none have done so thus far. Once inspection activities are concluded, the inspection team completes a draft inspection report outlining their findings.

Inspectors have three primary goals: 1) to verify that the declarations submitted by the facility are accurate; 2) to evaluate the risk the facility could potentially pose to the object and purpose of the CWC (preventing CW development, production, etc.); and 3) to check for undeclared Schedule 1 chemicals, the most toxic type of chemical controlled under the CWC. If the inspectors are unable to accomplish these three objectives, they may recommend that the facility be subject to more frequent inspections or include a negative finding in their report. The sites we have worked with have been very cooperative, and have provided positive feedback concerning the conduct of these inspections. The inspection teams have been uniformly respectful, professional and competent. So far, all industry inspections have been completed successfully, and while a few significant issues have arisen, there have been no findings of non-compliance.

The Commerce Department's role in these inspections is to assist the U.S. facility being inspected to prepare for the inspection and to protect its confidential business information while also fulfilling U.S. obligations under the CWC agreement. The U.S. host team usually includes four Department of Commerce personnel, including the host team leader, as well as escorts from the Defense Threat Reduction Agency and a representative from the Federal Bureau of Investigation. A typical deployment for the host team lasts approximately 10 days. This includes work at the site prior to the arrival of the inspectors, the inspection itself, the preparation of the inspection team's post inspection report and the time spent escorting the inspectors until they depart the U.S.

Upon receipt of a notification that an inspection team is about to arrive, Commerce contacts the site and offers to immediately fly an advance team to their location to assist in preparations for the inspection. The work of the advance team can be critically important in laying the groundwork for a successful inspection, particularly if no previous site assistance visit has been conducted at the facility.

The Commerce host team leader represents the U.S. in all dealings with the inspection team, but also acts as an intermediary with the facility representatives and ensures that their views are taken into account. Wherever possible, the host team will attempt to satisfy the inspection team's concerns by alternative means in order to avoid the disclosure of confidential business information. While the inspection teams occasionally attempt to probe for information beyond the bounds of their mandate, the host teams so far have had little difficulty keeping the inspections on track.

CWC inspections are relatively rigorous, so we have established a structure of support for industry at every step throughout the process. On our website (www.cwc.gov), we have posted comprehensive information on the CWC industry compliance requirements, including a number of outreach publications, declaration handbooks, the CWC Regulations, the text of the CWC and other resources. If companies are not sure whether a chemical they produce, process or consume falls under the provisions of the CWC Regulations, we provide them with commodity classifications upon request. This can be a difficult process, given the complexity of thresholds, mixture rules and other factors. We have responded to over 200 requests for commodity classifications this year.

We have conducted a total of ten seminars, including one just last month in Houston, to educate industry representatives on the declaration and inspection process. An eleventh seminar will be held late this year in Atlanta and will focus on inspections at facilities that produce, process or consume less toxic Schedule 3 and discrete organic chemicals with the broadest commercial uses. Inspections of these facilities have not yet begun in the US. We estimate over 400 industry representatives have attended one or more of these instructional seminars.

Facilities subject to inspection can request a site assistance visit, in which a Department of Commerce team goes to the facility to provide one-on-one assistance well before any inspection notification for the site has been received. The site assistance team walks the site through the elements of an inspection and tailors the information provided to the specific needs of the site. During these visits, the focus is on identifying CBI, creating a draft facility agreement, locating and assembling records that will make it easier for the inspectors to do their jobs, and preparing a pre-inspection briefing to introduce the inspectors to the facility. We have conducted site assistance visits at 10 facilities so far, and will continue to offer them to companies that request them to the extent that funds provided by the Congress and our personnel resources permit. We estimate that between 60 and 70 facilities subject to inspection could benefit from a site assistance visit, and we are committed to conducting as many as possible.

Inspections vary considerably from one facility to another. A large, complex facility engaged in multiple activities with multiple listed chemicals will necessarily be more complicated than, for example, a "close-out" inspection at a facility that has not been involved with scheduled chemicals for years. The inspection team has the right to conduct inspections for up to 96 hours at facilities producing Schedule 2 chemicals, regardless of the size or complexity of the facility. On a Schedule 1 inspection, which involves the most toxic chemicals, the inspection team has no time limit but generally restricts itself to 96 hours. In order to minimize the number of hours the inspection team spends at the site, we have worked closely with the OPCW and site personnel to expedite the inspection process. As a result, some recent inspections have been concluded in a shorter time. By utilizing site assistance visits and intensive advance team activities designed to anticipate inspector requests, we have been able to reduce the length of inspections and the burden upon industry.

Our preliminary data indicate that CWC inspection costs for each facility range from $15,000 to $63,000, depending in part on the number of personnel the site chooses to devote to the inspection and other factors. The average cost to the U.S. Government is approximately $50,000 per inspection. Such costs are to be expected given the labor-intensive nature of the inspection process, and are well within the estimates we provided to the Congress when the Convention was under consideration for ratification.

What lessons have we learned from the CWC inspections so far? In a nutshell, we can say, at least preliminarily, that the inspections to date demonstrate that it is possible to meet the requirements of a relatively rigorous international inspection regime at reasonable costs to both government and industry, and to manage the risks of revealing valuable company confidential business information. This lesson has to be considered preliminary because we have only begun the industry inspection process, and because how well the OPCW is able to preserve the confidentiality of the business information they obtain through the declarations and inspections, while satisfactory so far, remains to be proven in the long run.

The other lesson we have learned from these international inspections, however, is that this same degree of verification which we are attempting to achieve in the chemical field is unlikely to be achievable in the biological industry. A few comparisons will illustrate why.

First, confidential business information -- the intellectual property that biotech firms and their stockholders invest huge sums to develop -- is more pervasive at biological facilities than in the more mature chemical industry. Much information on chemicals and chemical formulae are published and in the public domain. In many chemical facilities, CBI is confined to a particular catalyst or production technique which is relatively discrete and simple to protect. That is less true for biological facilities, where far less information has been published and a company's confidential information is often contained in the genetic material of living organisms which are themselves the final product or a key agent in production.

That being the case, indirect methods of inspection such as "mass balance" don't work, and process sampling is out of the question at biological facilities. When living organisms -- which grow, reproduce and may be "engineered" -- are involved in a process, it is not possible to determine what is being produced simply by knowing the ingredients and the resulting products. Even without knowing the specific process by which a particular microorganism was developed, anyone who obtained a sample of a proprietary organism from a facility or a formula in a lab book could reproduce unlimited quantities of a finished product that may have cost hundreds of millions to develop and embodies a company's entire intellectual property assets.

To further complicate matters, much of the equipment involved in biological weapons development is dual-use and also used in such common and widespread plants as breweries, bakeries, dairy product plants, and the like. This, combined with the fact that the U.S. has by far the largest number of biological facilities in the world, raises serious problems for establishing biological declaration "triggers" that will limit international visits to a manageable number of facilities and avoid a regime in which U.S. industry bears an excessive number of visits and inspections.

These problems are further complicated by the fact that biological agents are naturally occurring. Finding a chemical like sarin in a commercial plant means someone deliberately produced it, and since sarin has no legitimate commercial uses, its presence is a clear signature of CW activity. By contrast, you cannot make that assumption about biological agents like anthrax, which are found in the natural environment and may have legitimate uses, such as in the manufacture of vaccines. So the threat of false positives is real in biological settings, and is of great concern to legitimate commercial producers whose integrity and reputation would be on the line during any type of on-site activity.

Finally, modern facilities are capable of sterilizing equipment in a matter of hours, completely eliminating any trace of organisms. The experience of UN Special Commission inspectors in Iraq indicates that on-site inspections cannot prove conclusively whether a site is involved in BW work or legitimate activities. That said, such on-site activities can provide useful information that can help contribute to our understanding of foreign BW programs.

The cost of future visits or investigations under a BWC Protocol is difficult to predict at this time. Imposing a CWC-style regime in the pharmaceutical and biotechnology fields would in all likelihood be considerably more expensive, given the serious CBI risks of such an exercise. On the other hand, more limited transparency visits would almost certainly cost less, because all access would be determined by the site and no CBI would be placed at risk. The declaration triggers included in any final Protocol will have a significant impact on the overall cost to industry. We estimate that there are only a few human vaccine producers in the United States, and at least 100 producers of vaccines for animals, all of which would almost certainly be subject to any future Protocol. Beyond that, it is unclear how many facilities will have a declaration requirement, since thresholds for fermenter size and other "triggers" that will determine the scope of any Protocol have not yet been agreed upon. The greatest impact on U.S. industry could come from the non-vaccine microbial production trigger, known as "Other Production Facilities." Depending on how it is constructed, this trigger could potentially capture a broad swathe of biotechnology firms, the vast majority of which are located in the United States.

We hope to get a better idea of the costs and benefits of visits and investigations by conducting a series of exercises mandated by Congress. With the assistance of PhRMA and the Biotechnology Industry Organization (BIO), we are seeking out potential industry sites and observers to participate in such government exercises. We believe additional trial visits or inspections could help give both government and industry greater insight into how a BWC Protocol might be implemented.

These comparisons with the chemical industry do not mean that a worthwhile BWC Protocol is not possible. There are potential solutions for many of the challenges I have discussed. The number of site visits can be capped to prevent excessive inspection of U.S. facilities. Routine inspections like those conducted under the CWC can be replaced with general transparency visits strictly managed and controlled by the U.S. Government and company officials. Declaration triggers can be tailored to avoid affecting common industries such as fermented foods and beverages. Clarification visits designed to address anomalies in declarations, as well as challenge inspections to investigate possible offensive BW activities, both of which the U.S. supports, can be limited to those approved by a majority of the participating countries ("green light filter"). And, of course, export controls on biological agents, relevant equipment and technology must be maintained along with any international BW regime.

The U.S. position in the BWC negotiations has been carefully crafted to reflect these modifications of the CWC model, offering a regime that would provide transparency rather than verification of compliance with internationally agreed prohibitions on biological weapons. The U.S. position reflects not only the greater challenge posed by monitoring potential biological weapons activity, but also the concerns expressed by U.S. industry. We believe, however, that a regime that significantly enhances transparency in the biological area is a worthwhile goal, and we remain committed to achieving such a regime.

For its part, if authorized and funded to do so, the Commerce Department is prepared to undertake the same efforts to assist the biological industry that we are providing to the chemical industry. As I've mentioned before, the Commerce Department's role is to minimize the cost and burden of inspections while maximizing the protection of confidential business information. That has been our goal throughout the implementation of the CWC, and I believe we have succeeded so far. Commerce will continue to ensure that industry concerns are taken into account and that protections for CBI are incorporated into any future BW regime. I am confident that industry will support a BWC Protocol if its concerns continue to be addressed in the negotiations.

Mr. Chairman, the stakes in these negotiations are high for the United States and for our economy. Our pharmaceutical and biotechnology industry is the world's leader. But competition is fierce and the levels of investment at risk are truly phenomenal. The loss of confidential business information in such an environment can be devastating. Industry support was crucial to ratification of the CWC, and it will be crucial for the ratification of a BWC Protocol.

We can best assure that support by building upon the cooperation we have received from industry in the CWC area and negotiating, as we are presently trying to do, a BWC regime that takes account of commercial realities and balances them with our need for enhanced arms control in this very challenging biological weapons arena.