NSC BRIEFING, 16 MARCH 1984

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86B00420R000200330001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 9
• Document Creation Date: December 22, 2016
• Document Release Date: September 15, 2009
• Sequence Number: 1
• Publication Date: March 15, 1984
• Content Type: MEMO

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STAT
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DEPARTMENT OF THE TREASURY
WASHINGTON, D.C. 20220
MAR - 91984
Further to our telephone discussion, I am
enclosing a copy of the Treasury position on
outstanding Export Administration Act issues
between this Department and Commerce. Any
assistance that you, the Director, or others
may be able to give us 'will be much appreciated
and, I firmly believe, in the national security
interest.
Sincerely,
John M. Walker, Jr.
Assistant Secretary
(Enforcement and Operations)
Mr. John McMahon
Deputy Director
Central Intelligence
Washington, D.C.
STAT
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MEMORANDUM
MAR - 91984
To: Honorable Donald Fortier
Deputy Assistant to the
President for National
Security Affairs
From: John M. Walker, Jr.~.M~..V.s`
Assistant Secretary
(Enforcement and Operations)
Treasury's Position on Issues Pertaining to the Amendment
of the Export Administration Act
This paper summarizes the position of the Treasury
Department on the following issues pertaining to the Export
Administration Act:
? Enforcement Responsibility
? Foreign Enforcement Responsibility
? Access to Licensing Information for Enforcement
Purposes
? Recognition 'of the Secretary. of the Treasury
in the Language of the Act
? Enforcement of Export Controls by Canada.
Issue I: Which Department, Treasury (throu h the Customs
Service) or Commerce, should exercise enforcement
responsibility under the Act?
Background: The Commerce Department has statutory authority
for its enforcement program under the present
Act; Customs conducts an enforcement program
(Operation Exodus) under a delegation of enforce-
ment authority from Commerce. With both Depart-
ments performing the same enforcement role,
disputes have occurred during the past two
years, both with regard to domestic enforcement
activity and to the conduct of investigations
in foreign countries.
Last August, OMB attempted to reach a compromise
position as the time approached for the Act to
expire, but was .unable to do so. Because of
the need to reflect an Administration position
on the issue at hearings before the International
Trade Subcommittee of the Senate Committee on
Finance, Counselor to the President Edwin Meese
gave the Departments guidance as follows:
(1) The Administration's should adhere to the status
quo; i.e., both agencies should continue to
enforce the Act.
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(2) Commerce and Treasury would resolve the issue
through an administrative agreement.
The present Act has since been extended twice
'and is set to expire on March 19, 1984. Although
the Departments have tried to resolve their
differences, conflict s. persist. Recent export
control cases and Congressional attention on
renewal of the Act have brought increasing
attention to the enforcement issue..
House Bill: Commerce is given authority to enforce the Act.
Customs (1) is limited to conducting inspections
where it has received s ecific information of
possible violations of the Act, (2) is specifi-
cally prohibited from conductin random ins ec-
tions, (3) must terminate any investigation at
the time of seizure, and (4) is barred from
expending more than $14,000,000 in any fiscal
year in the enforcement of ex ort control
(Section 12(a)].
Senate Bill: Sole enforcement authority is given to Customs
[Section 12(a)]. An amendment passed by the
Senate .provides $12 million additional funds to
maintain current levels of enforcement.
Treasury The Administration should support the
position: enforcement provisions of the Senate bill, which
would give Customs sole authority for both
domestic and foreign enforcement.
? Inherent conflict of interest within the
Department of Commerce - Promotion of trade
vs. export enforcement. Commerce lacks
enforcement incentive of a police-type agency.
? Many criminal investigations involve violations
of both the Arms Export Control Act CAECA)
and Export Administration Act. U.S. Customs
has exclusive responsibility for enforcing
the Arms Export Control Act and thus must
conduct an export control program in any
event.
? U.S. Customs has existing resources in place
while Commerce is in the process of building
parallel resources. Customs presently has 64
offices in the United States staffed by
criminal investigators whose duties include
EAA investigations. Commerce has only 4 such
offices (although several more are planned,
all in cities where Customs already has an
office}.
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? Customs is and has been more successful in its
pursuit of EAA violations than Commerce.
A recent Department of Justice document on
,major export control cases is summarized as
follows:
Agency
_
No. of major cases
since Jan. 1981
U.S.
Customs
31
Dept.
of Commerce
1
U.S.
Customs/DOC
(joint cases)
8
U.S.
Customs/FBI
(joint cases)
1
Other
Federal
4
Since the inception of Operation EXODUS in October
1981, Customs has had 346 cases accepted for
prosecution (90 EAA; 256 AECA), along with 235
indictments (28 EAA; 207 AECA) 302 arrests (43 EAA;
259 AECA), and 207 convictions (22 EAA; 185 AECA).
? Statutory law enforcement and border search
authority is possessed by Customs and not by
Department of Commerce.
? Customs and Commerce must compete for the
same sources of information in the high tech-
nology, exporting, law enforcement, and intel-
ligence communities. These sources are naturally
confused over the question of to whom to report
suspected violations. Customs,. with its greater
resources and long history in law enforcement,
is much better equipped to act on information
received.
Issue II: Which Department, Treasury (through the Customs
Service) or Commerce, should exercise enforcement
responsibility overseas?
Background: Both Commerce and Treasury currently claim the
right to enforce the Act anywhere abroad. Any
such enforcement requires a close working relation-
ship with foreign law enforcement authorities
since U.S. enforcement agencies have no inherent
jurisdiction abroad. After the Administration's
position in 1983 favoring adherence to a dual
agency status quo, Treasury agreed to a Memorandum
of Understanding with Commerce in order to try
to alleviate the confusion being created by
dual enforcement jurisdiction abroad. In Trea-
sury's view, this Memorandum of Understanding
was .only a partial solution to a less than
satisfactory state of affairs. It allowed both
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agencies to investigate abroad but provided for
Customs to be the liaision with foreign law
enforcement agencies except in six countries
(Austria, Blegium, India, Japan, Sweden and Tur-
key) in which existing relationships (and hence
confusion) would remain.
House Bill: Except in the context of enforcement generally
(see Issue I), foreign enforcement is not
addressed as a separate matter.
Senate Bill: Except in the context of enforcement generally
(see Issue I), foreign enforcement is not
addressed as a separate matter.
Treasury
Position: The Administration should support Customs as
the sole agency with foreign enforcement responsi-
bilities under the Export Administration Act.
? Customs has had long-standing relationships
with foreign police and customs services and
regularly trades information on a quid pro quo
basis. Any enforcement effort must depend
on such relationships.
? Customs has 35 investigators in foreign posts
in 10 countries. Commerce has a total of 2
investigators, one posted in Sweden and one
in Austria.
? Commerce's practice of using Foreign Commercial
Service Officers to conduct criminal investiga-
tions is in conflict with these officers'
mission of trade promotion. They are not
career criminal investigators and receive no
training in the profession.
? Foreign police and Customs counterparts are
today confused about which U.S. agency to
refer information concerning. technology diver-
sion. {British and West German authorities
have refused to deal with Commerce).
? In most countries, either the customs service
or the national police has responsibility for
export enforcement matters. Commerce-type
agencies perform this function in only a few.
? Customs participates in .the Customs Cooperation
Council which requires members to exchange
information and documentation on illegal
exports. Commerce does not participate.
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? As in the U.S., many criminal investigations
abroad involve violations of both the Arms
Export Control Act and the Export Administra-
tion Act. Customs has exclusive responsibility
for enforcing the Arms Export Control Act
abroad.
Issue III: What level of access should the Customs Service
have to licensing information maintained by the
Commerce Department?
Background: The Customs Service uses information in Commerce's
licensing files to support its investigative work.
Such information includes license applications,
denials, and other information important to
enforcement both at home and abroad. While
Commerce submits information from the files
to Customs, it does not allow Customs unfettered
access, but instead responds only to specific
requests for information.
House Bill: Because the House bill would place almost all
investigative authority in Commerce, the issue
would be practically moot.
Senate Bill: Does not directly address this issue, but
by designating Customs as the enforcement
agency under the Act, would logically lead to
greater access by Customs.
This issue should be resolvable through adminis-
trative means, without resort to legislation.
Treasury Under the current Act, Section 12(c), as
position interpreted by the Office of Legal Counsel, U.S.
Department of Justice, allows Customs the full
access it desires. Nevertheless, Commerce has
hindered the Customs enforcement effort through
an overly-restrictive interpretation of Section
12(c). Under the Senate bill, in Treasury's
opinion, Commerce would have difficulty main-
taining its policy of restricted access.
? Because Customs' requirements for access
to DOC records are inhibited by internal
control procedures within DOC, Customs'
investigations lack the information support
that would make Exodus more effective.
? The Commerce position continues to inhibit
Customs' analyses leading to the development
of enforcement programs and strategies.
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? The Commerce restriction on records access
prevents EDP networking by the involved
Departments. Such computer links would
benefit the Administration's licensing and
enforcement effort.
? Customs is providing DOC with direct access
to the U.S. Customs Service EXODUS data base
and is installing a computer in DOC's office.
-Issue IV: Statutory authority of the Secretary of the Treasury
.Background: The Secretary of the Treasury is not recognized
in the language of the Act pertaining to enforcement.
House Bill: Does not mention the Secretary in the enforcement
language.
Senate Bill: Would resolve this issue by granting enforcement.
authority to U.S. Customs.
Treasury
position: If the Senate bill is not supported by the
Administration, there should be, at the very
least, specific mention in the statute of the
Secretary of the Treasury's enforcement role
to clear up any possible challenge to the
validity of Treasury employees' actions under
the Act.
? If Administration believes in a Customs
role, then it should be fixed permanently
in the legislation.
? It is uncertain whether the Secretay of
Commerce himself has the authority to delegate
----------functions-to-another Department under---the ?`
present Act because of the somewhat confusing
wording in the Act. [50 U.S.C. Appendix 2403 (e)
and 2411(a).]
? Under the existing Act, a future Secretary
of Commerce could revoke any or all of the
authority delegated to Customs at any time.
Issue V: What steps should be taken to reduce the potential
for diversion of _strategic technology through Canada?
Background: The Export Administration Regulations permit
exports to Canada without a license. 1941 Hyde
Park Declaration affords "open border" arrange-
ments and facilitates uncontrolled re-export
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of U.S. goods from Canada to free world countries.
This is contrary to existing regulation which
requires a U.S. export license to re-export U.S.
goods from Canada to all other foreign destina-
tions. Canada views U.S. export enforcement
efforts by both Customs and Commerce as extra-
teritoriality and has restricted cooperative
enforcement efforts. Classified material suggests
that at least 15 computer systems have been diverted
to the U.S.S.R. through Canada.
This issue should be resolvable through adminis-
trative means, without resort to legislation
at the present time.
Treasury's A Committee, chaired by Treasury and consisting
position of the Departments of State, Commerce and Defersse,
shall be established to review and make recommen-
dations to improve current export procedures and'
controls between the U.S. and Canada.
? Canada's failure to clear re-exports with
the~United States Government affords diver-
sion opportunities.
? Enforcement difficulties caused by the Hyde
Park .arrangement, although recognized by
Commerce Department, are unresolved.
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