Third, there is the problem of enforcement. A company that violates the law by not applying for a license is rarely punished. For example, in 1996 Silicon Graphics Inc. of Mountain View, Calif., sold four supercomputers to one of Russia's leading nuclear weapon laboratories without the required export license. The U.S. computers were 10 times more powerful than anything the Russians had before. After the deal was done, Russia's nuclear chief told the press that Russia would start designing its warheads with simulated explosions using the American computers. There is strong evidence that Silicon Graphics broke the law. It clearly needed an export license and did not get one. The case went to a federal grand jury in 1997, where it has not been heard from since.

In 1999, the Cox Committee found that Hughes Electronics and Loral Space and Communications, two big American satellite makers, "deliberately acted without the legally required licenses and violated U.S. export control laws" when they helped China improve its largest rockets in 1995 and 1996. To boost their profits, these U.S. firms gave China technology that could, in the committee's words, increase "the reliability of all PRC ballistic missiles." These cases too went to a federal grand jury well over three years ago and have not been heard from since. I recommend that this Subcommittee ask

The United States can do a much better job of export control. One improvement would be to make the process transparent. We could start down that path by publishing a comprehensive list of dangerous buyers. The United States now publishes such a list in the Federal Register but it is far too small. The list for China contains only nineteen names. Our government has claimed that a more extensive list would reveal intelligence sources and set off diplomatic conflicts. But it is well-known that scores, if not hundreds of firms in China are active in nuclear, missile and military production. Their names are not secret. It is silly to pretend we don't know they exist. The same is true of the Indian organizations I mentioned above and scores of other Indian organizations like them. The computer industry, in fact, would welcome a list of dangerous buyers. Industry would prefer to spend its scarce marketing dollars on buyers that don't present problems.

As a first step in building such a list, I have attached to my testimony the names of 50 firms that are well-known parts of China's nuclear, missile and military complex. I should point out that this is not a blacklist. It is only a warning list. These names have been selected on the basis of reliable, unclassified information. I recommend that Congress submit these names to the Department of State, and ask for an opinion on whether the names should be included on the published U.S. export warning list. If the State Department judges that these firms should be included, then the Subcommittee should ask the Commerce Department to add the names to the "entity” list in Part 744 of the Export Administration Regulations. American firms should not unwittingly make sales that undermine American security.

Appendix to the testimony of Gary Milhollin, November 7, 2001

Chinese organizations that should be placed on the U.S. “entities list.”

22nd Construction and Installation Corporation (Yichang)

23rd Construction Corporation (Beijing)

Aviation Industries of China I and II (AVIC) (Beijing)

Beijing Institute of Aerodynamics (BIA) (Beijing)

Beijing Institute of Electromechanical Engineering (Beijing)
Beijing Institute of Electronic Systems Engineering (Beijing)
Beijing Institute of Nuclear Engineering (BINE) (Beijing)
Beijing Institute of Space System Engineering (Beijing)

Beijing Institute of Technology (BIT) (Beijing)

Beijing Research Institute of Uranium Geology (BRIUG) (Beijing)

Beijing Wan Yuan Industry Corporation (BWYIC) (also known as the China Academy of Launch Vehicle Technology [CALT]) (Beijing)

Chengdu Aircraft Industrial Corporation (CAIC) (Chengdu)

China Aerospace International Holdings Ltd. (CASIL) (Hong Kong)

China Aerospace Machinery and Electronics Corporation (CAMEC) (Beijing)

China Aerospace Science and Technology Corporation (CASC) (Beijing)

China Chang Feng Mechanics and Electronics Technology Academy (Beijing)
China Great Wall Industries Corporation (CGWIC) (Beijing)

China Haiying Electro-Mechanical Technology Academy (Beijing)

China Hexi Chemistry and Machinery Company (Beijing)

China Nanchang Aircraft Manufacturing Company (Nanchang)

China National Aero-Technology Import-Export Corporation (CATIC) (Beijing)

China National Aero-Technology International Supply Corporation (CATIC Supply) (Nanchang)

China National Nuclear Corporation (CNNC) (Beijing)

China North Chemical Industries Corporation (NOCINCO) (Beijing)

China North Industries Corporation (NORINCO) (Beijing)

China North Opto-electro Industries Corporation (OEC) (Beijing)

China Nuclear Energy Industry Corporation (CNEIC) (Beijing)

China Precision Machinery Import-Export Corporation (CPMIEC) (Beijing)

China Sanjiang Space Group (Wuhan)

Chinese Academy of Sciences (CAS) (Beijing)

Commission on Science, Technology and Industry for National Defense (COSTIND) East China Research Institute of Electronic Engineering (ECRIEE) (Hefei)

Harbin Engineering University (Harbin)

Hua Xing Construction Company (HXCC) (Yizheng)

Hubei Red Star Chemical Institute (also known as Research Institute 42) (Xiangfan) Luoyang Electro-optical Technology Development Center (LEODC) (Luoyang)

Nanjing University of Science and Technology (Nanjing)

National University of Defense Technology (NUDT) (Changsha)

Nuclear Power Institute of China (NPIC) (Chengdu)

Research Institute 31 (Beijing)

Shaanxi Institute of Power Machinery (also known as Research Institute 41) (Shaanxi) Shanghai Institute of Electromechanical Engineering (Shanghai)

Shanghai Power Equipment Research Institute (SPERI) (Shanghai)

Shanghai Xinfeng Chemical Engineering Research Institute (Shanghai)

Shanghai Xinli Research Institute of Power Equipment (Shanghai)

Shanxi Xingan Chemical Material Plant (Taiyuan)

Shenyang Aircraft Corporation (SAC) (Shenyang)

Shenyang Aircraft Research Institute (SARI) (Shenyang)

Xidian University (also known as the Xian University of Electronic Science and
Technology) (Xian)

Governmental Affairs Subcommittee on International Security, Proliferation and Federal Services

HEARING ON

THE PROLIFERATION OF WEAPONS OF MASS DESTRUCTION

"In April, I introduced the Nonproliferation Assistance Coordination Act to address the coordination of non-proliferation efforts in Russia and the former Soviet Union. Senators Lugar and Biden were original co-sponsors of this legislation.

The legislation I introduced was divided into eight sections. Section Four establishes a committee on nonproliferation assistance at the Assistant Secretary level or higher, to be chaired by a senior representative of the National Security Council and comprised of representatives from the Departments of State, Defense, Commerce and Energy. Section Five sets out the duties of the committee. Section Six relates to Administrative support. Section Seven protects confidentiality of information.

This morning the Senate Foreign Relations Committee gave its support to the Nonproliferation Assistance Coordination Act, by including it as part of the Security Assistance Act we passed out of committee.

The actions of the Foreign Relations Committee earlier today, and this current hearing, recognize the timeliness of the issue of nonproliferation. It has been ten years since the Congress took the important step to help reduce the threat of nuclear chaos emerging from the disintegration of the Soviet Union.