by William New

National Journal

In its energetic effort to reduce U.S. vulnerability to attack from weapons of mass destruction, the Bush administration is reaching out worldwide through a variety of security initiatives involving international trade.  Among those efforts is a heightened focus on trade in sensitive items that, when passing through the world’s key shipping hubs, are diverted for illicit purposes.

“State sponsors of terrorism and terrorist organizations increasingly are attempting to exploit the less-stringent controls that exist in the world’s transshipment hubs — often by diverting legitimate trade or through front companies posing as honest brokers,” said John Schlosser, director of the Office of Export Control Cooperation at the State Department’s Bureau of Nonproliferation.  He made his remarks this month at a regional forum on transshipment controls in Bangkok.

“Unless transshipment countries — like those you represent here today — catch up with these supplier states and similarly strengthen their export-control systems, they will remain an attractive target for this kind of predatory trade,” Schlosser told the gathering.

The United States controls its exports of munitions, as well as commercial goods that could have a dual, or military, use.  Dual-use items include chemicals and biological toxins; machine tools that can be used to manufacture missile parts; lasers and sensors; and electronics and high-performance computers. The government also follows several multilateral export control agreements, such as the Wassenaar Arrangement.

Now the administration is trying to persuade other governments, especially those with major shipping centers, to adopt similar controls.  Officials say the ultimate risk of failure could be a massive attack on innocent civilians.

“The problem arises when these items, which can be extremely dangerous in the wrong hands, don’t end up where they are supposed to,” Karan Bhatia, deputy undersecretary of commerce for industry and security, said in a speech this month in Bangkok.  The threat to global commerce “is the more insidious threat that through normal channels ... end-users `of concern’ will be able to acquire illicitly the most dangerous of items needed to build weapons of mass destruction or perpetrate acts of violence.”

In so doing, he added, “they threaten the public’s confidence and trust in international trade generally, and specifically in the commercial hubs that facilitate such traffic.”

John Bolton, undersecretary of state for arms control and international security, told the Fourth International Conference on Export Controls in Warsaw on Sept. 30, “In an effort to plug the holes in this system, we are encouraging countries around the world to adopt export controls that conform to international standards, to put in place effective licensing procedures and practices, and to back them up with capable enforcement mechanisms.” This is being accomplished through the State Department’s Export Control and Related Border Security Assistance program, under which the United States is “helping other countries to control the movement of goods and technology through their borders,” Bolton said.

“The whole administration is focusing more on transshipment countries,” a State Department official said this month.  For years, the focus was on “source” countries, such as Russia, Ukraine, and Kazakhstan, that had technologies and components needed to produce weapons of mass destruction.  In the past few years, however, those countries have tightened their export control laws and improved their enforcement capabilities, according to Schlosser.

The so-called transshipment countries the United States either is working with or wants to work with include Cyprus, Malta, Panama, Singapore, Taiwan, Thailand, the United Arab Emirates, and Vietnam. The goal is to persuade countries to adopt and effectively enforce controls on their transshipment trade. The preference is for countries to set up automated systems with “red flags.” Such flags could be a company’s name on a watch list, or an unusual quantity of controlled items that appear unsuited for the type of company the goods are going to.

Among the administration’s efforts is the Transshipment Country Export Control Initiative, led by the Commerce Department’s Bureau of Industry and Security.  “It’s all part of the post-9/11 [administration] initiative of pushing our borders out,” said Bhatia. TECI has two main branches: government-to-government initiatives and government-to-private sector initiatives.

BIS operates at the crossroads of trade and security and is focusing on helping global hubs develop policies to manage controlled items while allowing goods to reach their destinations on time.

“In each of these countries, it’s a process of developing expertise in areas such as export control laws and regulations, enforcement capabilities, and data collection and information-sharing,” said BIS head Kenneth Juster in an interview.  “The goal is to enhance security while at the same time promoting trade.  We can do this by focusing our efforts on that small component of trade that appears to present security problems.”

The Commerce team has become increasingly aware of the problem of transshipment, Bhatia said in an interview.  Recently, there has been “an increased sense of urgency” as evidence of illicit diversion has piled up, he added.  The initiative was driven by Commerce Secretary Donald Evans as part of the administration’s overall security plan.

The State Department chairs the formal interagency committee on export controls and handles day-to-day decisions on the issue, the State official said. Issues can rise to the level of the National Security Council, which coordinates committees at the deputy and assistant secretary levels.

The State Department manages funding for several of the initiatives.  Funding for export controls has averaged nearly $40 million annually since 2001, up from $3 million in 1998, the State official said.  The White House request for fiscal 2003, included in the foreign operations appropriations bill still before Congress, is $36 million.  Last year, an additional $25 million was provided for export controls under emergency supplemental spending.  For fiscal 2004, the administration will continue to seek a “good level of support” for the program, the official said.

Transshipment countries pose special risks for several reasons, according to Bhatia.  For one, a massive amount of trade flows through them, making them attractive targets.  For instance, the equivalent of more than 50 million containers a year has passed through the major ports of Southeast Asia in recent years.

Transshipment countries also have extensive shipping-related infrastructure that can be misused.  For example, these countries are often home to export-import businesses, brokerages, trading houses, free-trade zones, reprocessing zones, and other establishments, Bhatia said.  These countries also typically lie near countries or end users “of concern,” he said.  Finally, the transshipment countries often have looser export licensing requirements since they are not problem countries themselves.  For instance, under U.S. law, these countries typically receive favorable status for licensing requirements.

Bhatia said the increasing evidence of illicit transshipment comes from intelligence reports, the outcome of export verification visits, and lawsuits brought by government agencies.  Bhatia summarized a recent case he oversaw.

A U.S. manufacturer exported a device requiring an export license for shipment to higher-risk countries — but not to most transshipment countries.  After about five months, the manufacturer received a call from the user of the product complaining that it was malfunctioning.  The exported item had been calibrated for use at sea level, but it became clear that the user was at the altitude of the capital city of a nearby country — a well-known state sponsor of terrorism.

By tracking down shipping records and other evidence, Commerce was able to obtain a judgment against the trading company, which is now barred from doing business in U.S.-manufactured goods, Bhatia said.  The transshipment initiative involves building public-private partnerships with all players involved in moving a product.  That includes forwarders, integrators, airlines, shipping lines, airport and port facilities, trucking companies, brokers, and warehouses, as well as importers, exporters, and consignees.  The goals of the TECI program are to build awareness of the problem of diverted goods, develop channels of communication between industry and government, and create best practices.

For outreach, U.S. agencies are holding a series of meetings similar to the one held in Bangkok this month.  A meeting was also held in Barcelona, Spain, in May to address export controls in the Middle East.  This month’s three-day forum in Bangkok brought together law enforcement, trade, and customs officials with industry executives from major airlines, shipping companies, and other related service providers.  Governments represented included those of Australia, Cambodia, Hong Kong, Indonesia, Japan, Macao, Malaysia, Singapore, Sweden, Taiwan, Thailand, the United States, and Vietnam.

Bhatia said that at the conference, the United States got “buy in” from more than 35 companies, including some multinational ones like UPS.  “These people really are our front lines,” he said.  Getting buy-in from governments can be harder when they are not the originating or destination country, officials said.

The TECI program was announced in October by Juster, who traveled to Asia at the time promoting it.  Among other administration efforts, the U.S. Customs Service is heading a container security initiative to check shipments heading to the United States before they leave the country of origin (see GSN, Nov. 11).

Other initiatives, which involve the Coast Guard and Transportation Department, address the security of the world’s major ports and shipping lanes.  Still others, such as the Transportation Security Administration’s “known shippers” program, focus on screening cargo.  In October these initiatives and others received the endorsement of the leaders of the Asia-Pacific Economic Cooperation organization.

About Newswire  |  Contact National Journal  |  Re-Use Guidelines

HOME  |  CONTACT US  |  GET INVOLVED  |  SITE MAP

Back to top