High-tech firms may soon 'self-police' exports of sensitive goods
Boston — American companies selling high-technology products overseas will face less government red tape if new regulations proposed by the US Department of Commerce are adopted.
But they will also be entrusted with increased self-policing responsibility in selling and shipping goods like computer components that could be used to enhance the warmaking capabilities of other nations.
The new regulations - which Commerce will decide whether or not to put into effect after a 60-day comment period - are seen as a shift in emphasis by the department away from what industry officials viewed as an adversarial, rigid, and at times redundant system of policing companies trading in US high technology.
It is a shift industry officials hail as a step in the right direction.
''I think Commerce is taking a much more realistic view of the role of the distribution license and (the fact) that US suppliers are not the only suppliers in international markets,'' says Stephanie Biddle of the Computer and Communication Industry Association.
An estimated 780 firms currently use distribution licenses, which enable companies to ship products overseas repeatedly without going through the time-consuming task of applying for individual export licenses for each shipment. Distribution licenses account for roughly $20 billion in overseas business each year, or an estimated 15 percent of US manufactured goods.
Critics maintain that the proposed distribution license regulations may leave the US open to continued and heightened abuse of the export control system by a growing number of increasingly sophisticated technology smugglers.
Last January the Commerce Department proposed a much stricter version of the distribution license regulations. It would have required companies to file lists of all overseas customers and to obtain certifications from its customers that US goods would not be re-exported. That proposal met widespread opposition in the business community.
The recently announced regulations were based in part on some 250 comments and suggested revisions recieved by Commerce from business and trade organizations.
While initial industry reaction to the proposed regulations has been favorable, the reaction of the Pentagon has been one of concern. Defense Department officials complain that they weren't consulted on the draft regulations. They have raised questions in the past about the ability of the Commerce Department to handle trade promotion on the one hand, while on the other hand policing high-technology exports that are controlled to protect US national security.
Should Defense officials decide to try to block implementation, the White House might find itself involved in the decision on implenting the new rules.
Commerce officials view the new regulations as a balancing of the need to prevent diversion of sensitive US high tech against the need to ensure that American companies remain competitive in foreign markets.
''We are confident our new rules . . . will materially strengthen the distribution license procedure without imposing unneccessary regulatory burdens on US exporters,'' says Commerce Secretary Malcolm Baldrige.
The proposed system, scheduled to become effective in January, requires companies doing business in sensitive goods overseas to make sure that their products will not be illicitly diverted to the Soviet Union or its East Bloc allies. The regulations make it the responsibility of company personnel to investigate potential and current overseas customers to ensure that they are not doing business with anyone on the Commerce Department's list of persons and companies whose export priviledges have been revoked or suspended.
Compliance will be monitored through a series of random audits conducted periodically by Commerce officials.
Companies could be subject to both criminal and civil penalties if they are found to have done business - either knowingly or unknowingly - with an identified technology smuggler.
Commerce enforcement of the new regulations could open up a new ''can of worms'' for the high technology industry, some observers say. They note that the emphasis on corporate responsibility may lead to a number of cases in which the ''good faith'' efforts of American firms to prevent high-tech diversion come under scrutiny.
Although under current regulations US firms duped by sophisticated technology smugglers can face large fines for lack of vigilance, the new rules may raise the issue of how extensively US firms will have to investigate potential customers and whether American firms should be expected to become involved in activities that at times may approach counterespionage work.
Last week, Digital Equipment Corporation of Maynard, Mass. - the world's second largest computer firm - was fined $1.1 million by the Commerce Department in connection with a series of sales it made between August 1981 and January 1983 through its West German subsidiary to another firm in West Germany.
A subsequent Commerce Department investigation revealed that the firm, Deutsche Integrated Time, was a front organization for Richard Mueller, a fugitive from US justice and a suspect in a wide variety of technology smuggling cases.
Digital officials say they did not know that Deutsche Integrated Time was connected to Mueller, a West German national who is listed on the Commerce Department's list of some 1,000 individuals and companies whose export priviledges have been denied for violating US export regulations.
A company official says Digital decided to pay the Commerce fine to avoid lengthy and costly litigation that might have disrupted Digital's ability to conduct business.
Last April, a US federal judge fined the Swedish firm Datasaab AB $3.2 million for the firm's role in smuggling computer parts to the Soviet Union. The diversion was discovered after Datasaab was taken over by the Swedish communications firm L. M. Ericsson. Ericsson officials reported the diversion to US authorities.
The trial judge accepted Datasaab's no-contest plea but refused a joint recommendation by the Justice Department and the defendant that the fine be set at $1 million.