As the workshop’s final activity, the attendees gathered for a session of deliberations and discussion focused on a set of questions that the attendees received prior to the workshop. These questions were modified slightly from those in the Statement of Task (see Appendix A) to reflect the expertise of the final workshop program while remaining in accord with the intention of the task. The questions were:
- How do the changes in the global chemical manufacturing landscape over the last 10 years affect the efficacy of current regulatory structures regarding the monitoring and movement of chemical manufacturing equipment around the globe?
- Are there readily identifiable security gaps or mismatches that exist under the current system of controls and regulations? How might advances in manufacturing technologies, such as the increased use of microreactors, affect the ability to monitor for diversion or misuse of equipment?
- What changes or steps might be necessary in the next 10 years to support robust tracking and monitoring of potential dual-use equipment to support U.S. and global non-proliferation goals?
In addressing these questions, the following key points were raised, reiterating those that were noted throughout the day’s presentations and discussions:
- The rapid globalization of both the chemical industry and equipment manufacturing capabilities has created a situation where existing regulations and treaties are less capable of tracking and controlling the movement of chemical manufacturing equipment and where more emphasis is needed in education, training, and outreach efforts to create national and, even more importantly, corporate cultures that respect and support the goals of non-proliferation. (Mooney, Prieto, Souza)
- Regulations must balance the need to control the movement of chemical manufacturing equipment with the speed and flexibility that industry requires to operate profitably in an increasingly competitive marketplace. (Desrosiers, Wright, Cupitt) In general, U.S. companies’ internal policies are more restrictive than existing treaties require. (Mooney, Zahradnik, Desrosiers, Moakler)
To start the discussion, Charles Mooney said the biggest change over the past 10 to 20 years has been the shift from a regional production emphasis to a truly global one. By this he meant that as production capabilities moved outside of the United States or Europe, those capabilities were developed to meet local and regional needs for specific chemicals and materials. Today, chemical plants are not only flexible in terms of what they produce but they also can be dissembled and moved to meet demand as it shifts region by region. The relevance of this change, he said, is that the regulations as they exist today are U.S.-centric and were developed on the premise that all of the expertise for making and using chemical manufacturing equipment was located here and perhaps Europe. Going forward, a useful approach may be to get the message out to all of the new centers of global expertise that responsible use must be part of the corporate culture and that it takes effort and focus to develop that kind of culture.
Craig Desrosiers proposed that regulators should consider creating an “elite user” policy that would apply to specific companies that have gone through a pre-selection process. This process would assess a given company’s policies and its responsible uses of various types of equipment. Companies that met certain criteria would then be granted the ability
to move equipment around the globe to meet its production needs. Another approach would be for a company to provide a list of fabricators that it planned to use for some extended time period and that could be vetted ahead of time. “I understand the need for regulations, but it costs industry millions of dollars a year to fulfill these obligations. There has to be some way that you can get to the end goal that you need to get to, but we can be able to continue to operate,” said Desrosiers. Matthew Moakler said that the Commerce Department has a validated end user program, but that to be pre-approved by this program companies have to release details of their business practices to the federal government for review, something that most companies are reluctant to do. “It might be worth looking at this validated end user program and figure out how it can work more effectively.”
Richard Cupitt noted that there are provisions for what are called special comprehensive licenses that allow a company to export multiple times to the same end user or export certain commodities multiple times to different end users. He acknowledged that this program has not been used often because of the extensive set of requirements that companies have to meet to be granted this type of license, but he added that it may be worth looking more closely at this program to see if it can be improved and become more generally useful.
Ana Prieto asked if there might be a way of constructing tax breaks or other assistance so that smaller companies build the systems that will help foster a compliance mindset. She also noted that the pharmaceutical industry is developing technology that enables it to track individual bottles of drugs and wondered if that technology could be applicable to manufacturing equipment. Another participant asked if it would be possible to create one central source, perhaps a Web site, where a company could go to as a single source for information on export controls.
With regard to gaps that need to be addressed, Cupitt said that while all of the nations that have agreed to UNSCR 1540 have obligations to account for materials and equipment, many countries have not followed through on those obligations. He added that the United Nations committee that oversees UNSCR 1540 is in the process of collecting examples of how individual countries are working to meet these obligations. The chemical industry could play a role in addressing this gap by helping these countries better understand their obligations, an idea that Prieto, Astrid Lewis, and Maennig also suggested, with Maennig noting that outreach activities should be tried before creating new legal requirements. Lewis noted that the fertilizer industry, after the Oklahoma City federal building bombing, took it upon itself to educate the public and small business while Congress was trying to decide what kind of law to pass. Usha Wright, who moderated the discussion, said that it is important not to overburden industry with regulations that make it uncompetitive with companies based in countries with fewer regulations. She added, though, that industry has a vested interest in helping enforce the regulations that already exist because no company wants its name associated with some global terror event.
Andrew Souza, whose responsibilities at the Department of State include detailing cases of proliferation, noted that over the past 15 years the West has been closed to proliferators. Rather, proliferation has been tied to China, India, and other emerging countries. “We in the United States spend a lot of time and have spent a lot of time reaching out to these emerging chemical producing countries to get them more active and get their practices up to Western standards,” said Souza. “It is really only in the last five years that it is starting to dawn on countries like India and China that this is important and they have to devote resources to it. My hope would be in the next 10 years of more arm twisting and cajoling that we will get India and China to where they need to be. That will hopefully lighten the burden on the industry side because maybe we can look at relaxing the licensing requirements for those countries.”
Kathryn Hughes asked the industry representatives to comment on how their companies’ practices intersect with regulations. Mooney said that Xylem’s policies are based on the regulations but that they are often more extensive than regulations require. “Typically, our policies will go past the regulatory requirements,” he said, explaining that the reason for doing this is to protect the company’s name. Xylem also works with its employees to understand why these policies exist and why the company believes they are important. Zahradnik said that DuPont takes the same approach in at least some cases, believing that there can be more risk than embodied in the regulations and that company policies need to be more restrictive as a result in those cases. Desrosiers added that the vendors that DuPont uses globally go through an extensive qualification process, noting that he and his colleagues spend half of their time traveling to vendors to vet them. Maennig expressed a contrary view, stating that his company follows the regulations and goes no further, and he believes that the chemical industry is largely moving in that direction. “I am cautioning that you shouldn’t have too much hope that industry is going beyond what is really required,” he stated.
Prieto, who has had experience working with both large and mid-sized companies, said that large companies have the capabilities to engage in these types of self-regulating activities and outreach efforts. However, mid-sized and smaller companies often lack the necessary centralization, and in some cases, they do not even have the proper understanding of the regulations to enforce them with company policies.
Cupitt said that countries often react better when companies say that certain actions are taken for company policy rather than because it is U.S. policy. Along the same lines, Lewis said many countries say they agree to be part of international agreements because they hope to be eligible to compete for business in return. If companies are reinforcing
this idea through their own policies and stressing the fact that they will only do business with those that pass a vetting process that includes meeting treaty obligations, then that can act as a powerful incentive to these emerging economies to participate in these agreements.
Turning the discussion to the third question, Hughes asked the non-proliferation experts what capabilities they need going forward to keep track of what has become a highly complex, global chemical industry. “What are the networks, communities, and discussions that are going to allow you to be responsive, regardless of the regulations?” she asked. Moakler said that there are many processes within government that need to be improved to make the review process more efficient. He also said that much of what the Department of State has done so far is to engage international organizations such as the Australia Group and that these organizations are planning extensive outreach efforts that include compiling best practices that can be shared. He was curious as to whether there might be customer service type applications that industry uses today with its customers that might be duplicated elsewhere. For example, many consumer products today come with the opportunity to register the product online complete with serial number, establishing a communication channel between the buyer and seller. “A system like this might contribute to accounting later on,” he suggested.
Zahradnik asked if it would be possible to have EAR translated into Chinese and Hindi to make it easier for companies from those countries to follow U.S. regulations. Cupitt said that this would be expensive and that it would be unlikely that any translations would be considered official for legal purposes.
Addressing Hughes’s question, Cupitt said that it would be helpful to make it someone’s job to do outreach to industry on a regular basis. That occurs in some countries, he said, but it is usually done on an ad hoc basis. He also noted that U.S. agencies are making use of social media to do outreach and he wondered if it would be possible to do so using more formal mechanisms. “If you have formal mechanisms, it is usually part of somebody’s job and that somebody is then evaluated based on how well they do that job. Without that, it’s luck of the draw,” Cupitt said. He recommended, too, that licensing officers should be provided with regular training opportunities to learn about the latest technologies.
Lewis said that the U.S. government has several projects ongoing that may help track technologies. One project, known as FUSE, looks at all of the patents that have been filed using a number of databases and journals to identify new, emerging technologies and new code words being used with certain industries. Another program, called FORM-ST, goes out to the wider science and technology community to forecast potential breakthroughs in science and technology fields. Zahradnik added that the Department of Commerce does have technology advisory committees for each of the categories in EAR and that the agency is looking to broaden industry participation in these committees. Desrosiers asked if it would be possible to conduct a deeper analysis of the license applications that are not approved to serve as an educational component, and Moakler noted that his office is doing just that. In a final comment, Wright said that one resounding theme that came through in this discussion is that there is a role for partnerships within industry and between industry and government.
