Chemical & Biological Weapons

Early in 2007 Taiwanese officials reported that four packages they received from the US military did not contain the helicopter batteries that they were expecting. US officials told the Taiwanese officials to simply dispose of the incorrect items. Last week however posed a serious issue for the US Defense Department; apparently the Taiwanese officials opened the packages before disposing of them and alerted the US that they contained “warheads”.

It is uncertain how long the Taiwanese officials actually knew that the packages contained warhead-related material, but the drums had been in their possession for over 18 months and the US never noticed that the sensitive materials were missing. The items inside the barrels were labeled “secret” and they included Mark 12 nose cones, which are used in intercontinental ballistic missiles.

President Bush has ordered an immediate investigation to focus on whether the Air Force properly labeled the packages for shipment to the DLA, how it was stored, tracked and shipped overseas. Authorities claim that the packages were inappropriately stored in an unclassified warehouse and the outer packages might have been mislabeled. “The investigation will determine the integrity of the shipping containers and their contents during the foreign military sales process,” explained Air Force Secretary Michael Wynne in announcing the erroneous shipment.

So we should be concerned for various reasons here. First, the US Government didn’t notice that these nuclear bomb widgets were missing. Should we worry that there is other unknown missing nuclear bomb stuff? Second, should we assume this is the first time this has happened? Are there other boxes in some foreign government warehouse that contain nuclear weapons parts? And third, despite the fact that several mistakes were made in this case, the US Air Force should thank its lucky stars that it is not a regular exporter. If an exporter were to make the same mistake and ship the wrong military equipment to Taiwan, it would have an ITAR violation, which could result in significant penalties in some cases, and even if you don’t end up paying an ITAR fine, you could end up paying your lawyers a lot of money if you report the violation. And I am thinking that a company that would mis-label and illegally export nuclear bomb components would get both a fine and a large legal bill.

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Effective September 12, 2007, the Bureau of Industry and Security (BIS) will amend the Export Administration Regulations (EAR) to reflect changes to the “Control List of Biological Agents”. This rule will amend the EAR to reflect the admission of Croatia into the Australia Group and revises the CCL entry which controls equipment that is can be used in handling any type of biological materials. Lastly, the new rule will amend the list of countries that are States Parties to the Chemical Weapons Convention, Barbados will now be joining the party.

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Federal Register Notice

On Saturday, September 30, 2006, President Bush signed into law the Iranian Freedom Support Act. In addition to codifying existing sanctions against Iran, this act added significant new ones, targeting Iran’s efforts at nuclear proliferation, as well as the companies that assist them.

The act requires the President to impose these sanctions on any company or individual who knowingly provides goods, services or technologies to Iran which would aid them in acquiring, or developing, nuclear, chemical or biological weapons.

It is mandatory that the President impose sanctions on violating companies, but he does have the flexibility to choose among six separate sanctions. They are:

1. Withholding Ex-Im Bank financing and credit
2. Denial of export licenses
3. Prohibiting loans in excess of 10 million dollars to the sanctioned party
4. Prohibiting the sanctioned person form acting as a repository of government funds or from serving as a primary dealer of US debt instruments
5. Prohibiting the US government from procuring goods and services from the sanctioned person
6. Imposing any other sanctions under the International Emergency Economic Powers Act

Offending companies must be published in the Federal Register. No company has been listed yet, but it is likely that Russian and Chinese companies who have assisted Iran with nuclear facilities and missile technology will be among the first.

While most college-age Australians have nothing more to remember their birthdays than hangovers and bad sunburns, a rather more sober Australian twenty-year-old recently celebrated its first twenty years stemming the spread of chemical and biological weapons. I am speaking of course of the Australia Group, the informal multilateral export control regime which returned to its place of birth earlier this year for its twentieth annual plenary session. Speaking at the plenary, Australian Foreign Minister Alexander Downer recounted a bit of the organization’s history:

It is 20 years since Australia convened the first meeting of 15 like-minded countries in 1985 in Brussels.

That meeting was a response to the findings of a UN investigation, led by an Australian - Dr Peter Dunn, that Iraq had used chemical weapons in the Iran-Iraq war. It posed the question of how to prevent Iraq from acquiring materials for the production of chemical weapons through otherwise legitimate commercial trade.

The response - a proposal to harmonize national export controls - was endorsed by all present at that meeting, and the Australia Group was born.

But the plenary wasn’t all talk with the AG participants agreeing on three control list changes to refine limits on illegitimate trade in items with chemical or biological weapons end uses:

1. Simplification of the types of pumps subject to controls due to their usefulness in manufacturing chemical weapons (the US controls such equipment under ECCN 2B350.i).
2. New controls on spraying or fogging systems designed for use with aircraft or unmanned aerial vehicles (UAVs) and capable of delivering droplets of less than 50 m in diameter at a rate of greater than 2 liters per minute (ECCN 2B352).
3. A revision to the technical note clarifying that the controls applicable to genetic elements and genetically-modified organisms also cover nucleic acid sequences that represent a significant hazard to human, animal or plant health or enhance the ability of AG-controlled or other microorganisms to cause harm. (This change in particular has potentially significant implications for firms and universities involved in biotechnology research. The revised technical note can be found under ECCN 1C353).

It may have taken nearly four months, but the US Bureau of Industry and Security did finally turn up with a gift in honor of the AG’s first twenty years on August 5 - a regulation implementing the group’s new rules. In addition to the control list and technical note revisions explained above, the BIS rule updates the Export Administration Regulations to reflect a new AG participant (Ukraine), the fact that the tiny Pacific island nation of Niue has acceded to the Chemical Weapons Convention, and a new name for the largest part of the former Yugoslavia (Serbia and Montenegro).

Without formally requesting comments, BIS on April 14 published a rule substantially increasing export restrictions on several items subject to controls for chemical or biological weapons reasons (CB). This regulation comes only two weeks after a March 30 rule expanding the scope of CB catch-all controls to include members of the Australia Group (AG), the multilateral group which seeks to limit the proliferation of chemical and biological weapons. Steven Goldman, director of the Office of Nonproliferation and Treaty Compliance, first alerted the exporting community to the prospect of the new rule in a January 27 meeting of the Materials Technical Advisory Committee (MTAC). (This is as good a time as any to remind folks to be sure to read the meeting minutes of the TACs related to your business for all sorts of interesting nuggets, at least from those committees which deign to hold their discussions in open session and bother to publish minutes at all.)

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The last in a Herculean series of March rulemaking efforts by BIS came on the second to last day of the month - an expansion of the scope of chemical and biological weapons (CBW) end-user and end-use controls to cover every country in the world.

These CBW prohibitions are one flavor of the catch-all controls encompassed within the EAR.  Even when an item would not ordinarily require an export license to be shipped to a particular destination, the exporter is obliged to seek a license from BIS if he knows that the item will be used in the design, development, production, stockpiling, or use of CBW.

Similar end-use and end-user restrictions are in place on nuclear, rocket, UAV, and maritime nuclear propulsion activities (see EAR Part 744).

The March 30 regulation widens the scope of these controls by eliminating the exemption to them for members of the Australia Group (AG), the informal international arrangement that seeks to limit the proliferation of CBW-related materials and technology.  Now US exporters will need to scrutinize orders from AG countries such as the Belgium, South Korea, and Sweden for CBW end-users and end-use with the same due diligence they have long been required to exercise when it came to the rest of the world.

In the June 26, 2001 Federal Register the Office of Chemical, Biological and Missiles Proliferation in the State Department imposed sanctions on a PRC entity pursuant to the Iran Non-Proliferation Act of 2000. The PRC entity is Jiangsu Yongli Chemicals and Technology Import and Export Corporation (China) (”JYCTIEC”), including any of its successors, sub-units or subsidiaries. The Federal Register notice did not describe specifically what the Chinese entity did. Apparently, the sanctions are in response to JYCTIEC transferring dual-use chemicals and chemical processing equipment to Iran.

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