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FACT SHEET: Export Controls on High Performance Computers

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                              THE WHITE HOUSE

                       Office of the Press Secretary

|                                                       |
| For Immediate Release                                 |
|                                                       |
  |                          |
  |         January 10, 2001 |
  |                          |


The President today announced the sixth revision to U.S. export controls on
high performance computers (HPC) since 1993.  The President?s action will
promote our national security, enhance the effectiveness of our export
control system and ease unnecessary regulatory burdens on both government
and industry.

Review of Alternative Control Measures.  In 1995, the President announced a
new policy for controlling the export of HPCs.  The new policy focused on
two complementary objectives: (1) limiting the acquisition of computational
capabilities by potential adversaries and countries of proliferation
concern, and (2) ensuring that U.S. domestic industries supporting
computing capabilities important for national security could compete in
markets of limited security or proliferation risks.

The new policy controlled hardware and software products and technology.
The Administration recognized that the controls would need periodic
adjustment to ensure effectiveness, given the ever-increasing availability
of commodity products, such as workstations and servers, of which millions
are manufactured and sold worldwide every year.  Until recently, the 1995
policy has been able to keep pace with this growth by adjusting hardware
controls periodically to ensure that controls were only placed on computers
that could be effectively controlled.  Control levels have been based on a
metric of performance that was well suited to the computer architectures of
the mid-1990?s -- that is, measuring performance in millions of theoretical
operations per second (MTOPS) through a fixed formula.

In mid-1999, it became apparent that the growth in widely available
computer hardware capabilities was outpacing the ability of  export control
policy to keep up.  President Clinton announced in July 1999 that hardware
controls would be adjusted more frequently and that the Administration
would seek a more effective way to control the export of computational
capabilities important for security and proliferation interests.  The
review, which began in the fall of 1999 and involved all relevant security
and nonproliferation agencies and private sector experts, sought to address
the realities of the computer hardware market, including the continuing
growth in single processor performance that can be aggregated relatively
easily into multiple processor machines, and the advancements in
interconnection capabilities that allow end-users to network large clusters
of computers.  The latter element has, in particular, become the single
most important challenge to the ability to effectively control computer

The Administration has concluded that there are no meaningful or effective
control measures for computer hardware that address the technological and
marketplace challenges identified during the review.  The review found that
the ability to control the acquisition of computational capabilities by
controlling computer hardware is becoming ineffective and will be
increasingly so within a very short time.  This conclusion reflects our
understanding of the level of hardware capabilities needed to address
problems of national security and nonproliferation concern.  Nevertheless,
the review did find that there is merit in continuing to control national
security and proliferation-related software.

Given these conclusions about the inability to effectively control computer
hardware, the Administration would prefer to remove most controls on
computer hardware exports, including the existing controls on exports to
Tier 3 countries.  However, it recognizes that the new Administration needs
an opportunity to examine such a proposal, and, that as a legal matter, the
FY 1998 National Defense Authorization Act (NDAA ? P.L. 105-85) requires
continued use of MTOPS to control computer exports to Tier 3 and Tier 4
destinations.  The President has decided, therefore, based on the advice of
n7ational security agencies, to revise the current HPC control policy in
the short term consistent with legal requirements, and at the same time to
propose a longer term strategy for the consideration of the next

The Revised Controls.  The Administration will change the four tiered
country group structure created in 1995 to a three tiered system as

Tier 1 (encompassing Western Europe, Japan, Canada, Mexico, Australia, New
Zealand, Hungary, Poland, the Czech Republic and Brazil) and what was
formerly Tier 2 (South and Central America, South Korea, ASEAN, Slovenia
and most of Africa) will be combined into a single Tier 1.  Exports without
an individual license will be permitted for all computers (i.e., there is
no prior government review) destined for end-users/end-uses in this
combined Tier 1.  Lithuania will be moved from Tier 3 to the new Tier 1.
P.L. 105-85 requires a 120-day congressional notification before this move
becomes effective.

Tier 3 (India, Pakistan, all Middle East/Maghreb, the former Soviet Union,
China, Vietnam and  Central Europe).  Based on President Clinton?s August
2000 decision, effective February 26, 2001, exports will be permitted under
general license up to 28,000 MTOPS and individual licenses are required for
exports to all end-uses and end-users above that figure.

The Administration will implement a new level, 85,000 MTOPS, above which
individual licenses will be required for all end-users in Tier 3 countries.
This new level will become effective at the same time as the new NDAA
notification level.

NDAA Notification.  P.L. 105-85 imposed a requirement for companies to
provide the Commerce Department with prior notice of exports for systems
above a certain level to all Tier 3 end-users.  U.S. export control
agencies have 10 days to inform the company if it must apply for a license.
The President?s August 2000 decision raised the NDAA notification level to
28,000 MTOPS; that decision will become effective on February 26, 2001.

The NDAA notification level will be raised from 28,000 MTOPS to 85,000
MTOPS.  The President will advise the appropriate Congressional committees
of his decision to raise the NDAA notification level.  By law, Congress has
sixty days to review this decision, after which the change will become

Tier 4  (Iraq, Iran, Libya, North Korea, Cuba, Sudan and Syria).  There are
no planned changes for Tier 4 countries, current policies continue to apply
(i.e., the United States will maintain a virtual embargo on computer
hardware and technology exports to these destinations).

For all these tiers, re-export and retransfer provisions continue to apply,
and we will continue the policy of individual license review under the
Enhanced Proliferation Control Initiative (EPCI), which provides authority
for the government to block exports of computers of any level in cases
involving exports to end-uses or end-users of proliferation concern or
risks of diversion to proliferation activities (e.g., foreign nuclear
weapons design laboratories).  Criminal and civil penalties apply to EPCI

The revised controls will become effective when they are implemented in
formal Commerce Department regulations.  In addition, the Commerce
Department will continue to review its list of published entities of
concern as a means of informing exporters of  potential proliferation and
other security risks.  The Department will remind exporters of their duty
to check suspicious circumstances and inquire about end-uses and end-users.
Exporters are advised to contact the Commerce Department if they have any
concern with the identity or activities of the end-users, and the
Department will work to expand its efforts -- through public seminars and
consultations with companies -- to keep industry regularly informed
regarding problem end-users and programs of proliferation concern.

Enhanced Controls on Critical Applications Software.  In addition to these
short term changes, the President has directed agencies to undertake a
six-month effort to increase the awareness within industry and the
government of the already strong export controls that exist on software for
national security applications (e.g., codes for the design, development and
operation of weapon systems), and to identify and invest in additional
measures for the protection of critical national security software codes.

Legislative Proposal.  Given the Administration?s conclusions about the
lack of controllability of computer hardware, the inadequacy of MTOPS as a
control measure, and the lack of appropriate substitutes, the President
also proposes that  Congress repeal the provisions of P.L. 105-85 that
require notification of certain proposed computer hardware exports, waiting
periods for adjustments in controls and post-shipment visits.

Multilateral Coordination.  The Administration has consulted with other
nations, including members of the Wassenaar Arrangement, to ensure that
they understand the basis for today?s changes in controls.  We are
committed to working closely with them to adjust multilateral controls to
reflect technological advances and collective security concerns.  Our
controls remain consistent with the purposes of the Wassenaar Arrangement
-- to deny arms and sensitive dual-use technologies to countries of
concern, and to develop mechanisms for information sharing among the
partners as a way to harmonize our export control practices and policies.
The United States will also continue to implement reporting requirements on
computer exports as appropriate to fulfill U.S. obligations under the
Wassenaar Arrangement.

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