INTERNATIONAL TRADE REPORTER S NUMBER 351 EARLY ENFORCEMENT CONCLUSIONS OUTLINED

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83M00210R000300010002-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 4
• Document Creation Date: December 20, 2016
• Document Release Date: March 16, 2007
• Sequence Number: 2
• Publication Date: March 31, 1981
• Content Type: OPEN SOURCE

Number 351 HIGHLIGHTS March 31, 1981
Embargo to Continue President Reagan and Secretary of State Alexander M. Haig
Reagan, Haig Say Jr. both say the embargo of agricultural exports to the Soviet
Union will not be lifted until there are some improvements in
relations between the superpowers, particularly regarding the crisis in Poland. The state-
ments appear in different March 29 interviews. (Page A-4)
Trade Illuminaries Crowd International trade experts, both in and out of government,
Annual Chicago Conference gather in Chicago during the annual World Trade Conference
to discuss the pros and cons of the Reagan Administration's
efforts to cut inflation at home and spur exports. Slashing the Eximbank's budget evolves as
main target of criticism. (Pages C-1, C-4)
Trading Company Bill Senior members of the House and Senate judiciary committees
Hits First Snag in House are not anxious to see a major function of the Department of
Justice -- exempting certain firms from U.S. antitrust laws --
be shifted to the Commerce Department. A House panel hears arguments for the move from
Commerce Secretary Malcolm Baldrige and the Senate committee chairman introduces a bill
to make it easier to export under the old procedure. (Page C -2)
Early Enforcement Some of the preliminary conclusions of the review of export
Conclusions Outlined control enforcement begun last year are outlined during a
partially closed House hearing on enforcement issues. The
House subcommittee holding the hearing wants to see the study, which is currently in the
possession of the National Security Council. (Page A-1)
Deputy Assistant Secretary of Commerce for Export Administration Eric Hirschhorn
is expected to be replaced by Bohdan Denysyk of EG&G Washington Analytical Services Center
Inc., a consulting firm, in the near future, sources report. (Page A -4)
An order temporarily denying export privileges is issued against several individuals
and companies in the United States and Europe in connection with an ongoing Compliance
Division investigation. (Page A-5)
Selected Commerce Department tables on February trade balance ...... M-1
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(No. 351) A - 1
3-31-81 (ITEX)
U.S. CONTROLS
EXPORT CONTROLS: EARLY WORKING GROUP
Some of the preliminary conclusions of the review of export control enforcement begun
last year were outlined during a partially closed House hearing on enforcement issues March
26.
The House Foreign Affairs Subcommittee review, which is currently being held eby the National
the hearing, wants to obtain a copy of
Security Council.
Former President Carter last year directed the Commerce and justice Departments
to strengthen enforcement of federal export control laws concerning eto ain co ova cist cou -'
tries. An interagency working group, was charged with examining ways
with export control laws (323 ITEX A-1), the report discussed at last week's hearing.
Initial Work Complete
Associate Deputy Attorney General Robert L. Keuch ort kaschairs the wwor orkin the up,
said the panel's initial work is now completed and that a rep gone
Special Coordinating Committee.
The working group has tentatively concluded, Keuch said, that exports are controlled
Nuclear
mainly by three laws administered by three agencies -- the Atomic Energy Act by the
Regulatory Commission, the Export Administration Act by the Commerce Department, and the
en de pa rtments
gencies have
Arms Export Control Act by the State Department; sev
of other
is a
tigative or intelligence interests in the export control process; there large number
working groups with interests in aspects of export control -- including the Economic De me se
Advisory Committee (EDAC) I, EDAC II, the NSC Technology Transfer
departmental Committee on Internal Security; and there is sufficient dilution or dispersion of
authority that much needs to be done to strengthen government
A number of steps have been taken to improve the situation, he said, including direction
diffices)
by the Federal Bureau of Investigation to its Special Agents in Charge (heads violations FBI field
and legal attaches that they should move to make sure possible export
under Commerce's
covered through intelligence are reported to the FBI and that cases coming
jurisdiction are reported to Commerce.
A September 11, 1980 Justice memorandum to U. S. Attorneys noted the establishment
of the working group and directed U. S. Attorneys to review their procedures "to insure that
export control violations are aggressively investigated and prosecuted. (Of particular concern
are shipments of sophisticated technology, goods, and data to communist countries. )" The
memorandum went on to say that if assistance was needed it would be provided.
In addition, Keuch said, justice has assigned a senior attorney to work with Commerce
and that the Director of Central Intelligence (the President's primary foreign Intelligence
advisor, a post filled by the head of the Central Intelligence Agency) "has reminded the intelligencE
community of its obligation. . . to report possible violations of export control statutes. .
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U. S. CONTROLS (ITEX) 3-31-81
A - 2 (No. 351)
Other actions Keuch mentioned included the holding of a seminar for the export control
community to review ways to request new foreign intelligence, the establishment of a Com-
merce Department contact point for advice on laws and regulations related to export controls
and the initiation of a pilot project by Commerce and the CIA "to simplify compliance with
statutory restrictions on disclosure of export licensing data. "
The Internal Security Section of Justice's Criminal Division has "assigned the highest
priority" to national security cases coming under the three export control laws and justice has
assigned a senior executive service attorney "to work closely with Commerce to develop in-
vestigative programs specifically designed to ferret out violations of export laws, and it is
committed to providing the necessary resources to prosecute any known violators it discovers
in the process, " he said.
Although Keuch described his statement as a fair overview of the unclassified portions
of the report, the subcommittee is interested in getting the report itself for a number of
reasons, including the possibility it may have suggestions of its own and because a number of
members are concerned about coordination between government agencies involved in export
control matters.
Two of the witnesses in the public portion of the hearing referred to increased export
controls violations.
Office of Export Administration Director William V. Skidmore told the panel that
Commerce has noticed increased foreign policy export controls violations recently, adding,
"We have no analysis or evidence as to why this is occurring.
Increased Controls Violations
He also said while discussing illegal reexports that with advances in technology, some
controlled commodities are becoming easier to transport illegally and that diverters "are
using more sophisticated means of diversion such as establishing a number of 'front' com-
panies and individuals to move their illegal wares through several countries to proscribed
destinations.
"We have no evidence that the number of violators has increased substantially. Re-
cently, however, we have become more aware of, and we are quite concerned about the scope
and magnitude of diversions by those engaging in such illegal activity," he said, adding that
this awareness is largely due to efforts to enhance enforcement and to improve coordination
with the intelligence community.
Acting Customs Commissioner William T. Archey said in written testimony that in the
last several years there have been "significant increase(s) in the magnitude and complexity
of known diversions and attempted diversions of critical technology to areas where the politi-
cal philosophy is contrary to United States interests."
The subcommittee went into closed session to hear testimony from the CIA and FBI
and discuss classified matters, and it was reported that the intelligence community's tone
was that there has been an increase in incidents of diversion and clandestine efforts to obtain
controlled items, especially semiconductors.
Deputy Assistant Secretary of State for Economic and Business Affairs Harry Kopp
said State has recently placed considerable emphasis on strengthening cooperation between
COCOM and cooperating nations and has tried to get these other countries to strengthen their
own compliance efforts.
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3-31-81 (ITEX) U. S. CONTROLS (No. 351) A - 3
At U. S. behest, he said, COCOM's Subcommittee on Export Controls met twice in 1980
study cooperative aspects of national compliance activities and the subcommittee is expected
to meet again late in the spring. Kopp said the United States will soon be submitting proposals
to the subcommittee on improving mutual enforcement efforts and protection of national secu
city items between COCOM members and other countries.
Kopp said COCOM allies and other friendly countries "have generally been very coop-
erative" with U.S. investigations of suspected control violations but said some have expressed
concern over U. S. use of embassy personnel to question foreign firms directly or to serve ju-
dicial or quasi-judicial, papers on them, maintaining such actions violate their own judicial
sovereignty.
"In some cases legislation originally passed to insulate local firms from U. S. antitrust
inquiries is now being invoked to inhibit direct approaches on export control compliance mat-
ters. These foreign governments have suggested that we should channel such inquiries through
local government officials and rely on existing formal agreements for process service, " he
said.
"In response, " Kopp said, "we have maintained that direct access to foreign firms en-
gaged in the acquisition or shipment of U. S. -origin items is part of an embassy's normal com-
mercial function and is analogous to activities regularly assigned by all of our countries to
embassy commercial personnel. "
East European Control of Companies
Skidmore also discussed control of technology transfer through acquisition of U. S.
technology companies, in particular by East European interests. An NSC study completed in
1980 indicated U. S. firms are being acquired by governments of countries subject to export
controls (323 ITEX A-1).
"There is some potential for domestic acquisition and subsequent illegal transfer of
technology by foreign-owned entities controlled by governments or citizens of countries to
which exports are restricted for national security purposes. We are now exploring ways to
control this activity through our regulations, " Skidmore said.
Aircraft Engine Diversions
Another matter which came up in connection with the hearings is the investigation of
possible illegal exports of aircraft engines to Libya.
The State Department confirmed last month that at least one U. S. -manufactured air-
craft has been exported to Libya without the required license and a U. S. official said at the
time that Libya periodically tries to obtain U. S. -made planes and that there are numerous re-
ports of purchase attempts by Tripoli (346 ITEX A-5).
Archey said in a letter to Subcommittee Chairman Jonathan B. Bingham (D-NY) in re-
sponse to staff inquiries about investigations of illegal C-130 exports to Libya that no such in-
vestigations have been made by Customs.
"However, " he said, "in 1978, we did have an investigation involving an allegation of
illegal exports of C-130 aircraft engines to Libya. In July of 1978 the Department of State re-
quested Customs to investigate an alleged diversion to Libya of ten C-130 aircraft engines val-
ued at $2, 525, 000. The engines were exported under Department of State license by a U. S,
corporation to a foreign intermediate consignee in London. The ultimate consignee was listed
as a company in Jordan. This investigation is still under way.
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