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Twenty-four Associations Urge Secretary of Commerce to Consider Costly Implications of Proposed China Export Control Regulation
Date: 12/1/2006

NFTC and Other Leading Business Groups Call Rule Unilateral and Cite Compliance Burdens

Washington, DC ­- The National Foreign Trade Council (NFTC) today joined 23 other prominent business associations in calling on the U.S. Secretary of Commerce to withdraw and reconsider moving ahead with a proposed export control regulation for the People’s Republic of China. In a letter sent to the Bureau of Industry and Security (BIS) today, the business groups raise concerns about the proposed rule, citing that it is unilateral and out of step with diplomatic efforts, imposes excessive compliance burdens on U.S. businesses, and does not advance national security interests.

“The proposed regulation is difficult to reconcile with broader U.S. policy towards China and other U.S. strategic goals,” the groups stated. “We believe that the regulations could well have a serious deleterious impact on the significant political, military and foreign policy relationships developed with China as well as the bilateral economic relationship,” the letter continued.

“The key problem with the proposed regulation is that it undercuts the United States’ efforts, both long-term and those stated recently, to ensure that China is a ‘responsible stakeholder’ in the global community. The reality is that we can’t have a U.S. policy where we both seek to engage China on a broad number of issues ranging from diplomacy to the value of currency to trade, and at the same time impose unilateral, broad-based regulations on U.S. exports to China,” said NFTC President Bill Reinsch.

In the letter, the business groups reference a number of key concerns about the proposed regulation, including the list of items defined as “subject to the military end-use license requirement.” The trade groups argue that the list and rule are ineffective strategies if the end goal is to deny Chinese military access to those items because many of these goods are already produced in China or are widely available in the international marketplace. The attachments to the letter provide detailed evidence of foreign availability.

“We haven’t been involved in export control issues before. We are deeply involved in this now because our members have made it clear that the proposed regulations are unrealistic and simply unworkable,” said Dirk Van Dongen, President of the National Association of Wholesaler-Distributors. “If adopted as proposed, they will shut down markets for American firms without denying Chinese buyers the products they desire. This does nothing to further our security.”


Because the proposed export controls are unilateral and will not be implemented in coordination with U.S. allies, their effectiveness is questionable. Also at issue are concerns about cumbersome compliance burdens for U.S. businesses that would result from the rule’s implementation.

“It remains unclear what benefits and positive outcomes are intended to result from this regulation. What is clear, however, are the costs to U.S. businesses,” said Robert Holleyman, President and CEO of the Business Software Alliance (BSA). “If implemented as drafted, the rule would impose increased liability risks as well as stifling financial costs on American companies seeking to comply.”

For example, as the letter details, the regulation’s application to reexports would require American firms to obtain information from their customers about their intentions for purchased goods downstream. The regulation would also impose additional certification burdens on the Chinese government. The business groups estimate that these kinds of compliance requirements and other provisions included in the rule could result in an adverse effect on the U.S. economy of way over $100 million annually.

“Requiring China to issue end-user certificates of Chinese customers for any licensed sale over $5,000 goes far beyond anything being required by our allies. We need to protect our legitimate security concerns, but not unnecessarily undermine our competitiveness,” said John Frisbie, President of the US-China Business Council.

“This rule is not a small policy change, but rather a major shift in the way we approach U.S.-China economic relations. The impact on the U.S. business community will be extensive as will the strain on ties between the United States and China, which is a vital ally,” said Reinsch. “We urge Commerce Secretary Gutierrez and Administration officials to take these very serious concerns into account as the rulemaking process continues.”

A copy of the letter is available at http://www.nftc.org/default/export%20controls/BIS%20China%20Reg%20Indus%20Ltr.pdf


Advancing Global Commerce for Over 90 Years
The National Foreign Trade Council (www.nftc.org) is a leading business organization advocating an open, rules-based global trading system. Founded in 1914 by a broad-based group of American companies, the NFTC now serves hundreds of member companies through its offices inWashington and New York.