LEXIS-NEXIS® Congressional Universe-Document
LEXIS-NEXIS® Congressional
Copyright 1999
Federal News Service, Inc.
Federal News Service
JUNE 24, 1999, THURSDAY
SECTION: IN THE NEWS
LENGTH: 2107 words
HEADLINE: PREPARED TESTIMONY OF
MS. KAREN MURPHY
DIRECTOR OF GLOBAL CUSTOMS AND EXPORT COMPLIANCE
APPLIED MATERIALS
BEFORE THE
SENATE BANKING, HOUSING AND URBAN AFFAIRS COMMITTEE
SUBJECT - HEARING ON REAUTHORIZATION OF THE EXPORT ADMINISTRATION ACT:
PRIVATE SECTOR VIEWS
BODY:
Good morning, Mr. Chairman and members of the committee. My name is Karen
Murphy and I am the Director of Global Customs and Export Compliance for
Applied Materials, Inc. (II am here today on behalf of Semiconductor Equipment
and Materials International (SEMI), the trade association for our industry.
SEMI represents over 1100 U.S. manufacturers of semiconductor production
equipment and materials in 40 states. I also chair the Export Control Committee
of the American Electronics Association, and am a member of the President's
Export Council, Subcommittee on Export Administration.
I have a brief oral statement describing my company and industry, along with
comments on the draft bill released last week by your committee. I ask that my
longer written statement be made part of the record. Before commenting on the
substance of the issue
before us today, I want to thank you not only for all the hard work you and
your committee have done so far, but also for giving me the opportunity to
testify about an issue of critical importance.
My company, Applied Materials, is the world's largest maker of semiconductor
manufacturing equipment. We had sales in 1998 of just over $4 billion. We are a
global company headquartered in Santa Clara, California. We employ over 12,000
workers in facilities and offices throughout the United States, Asia and
Europe. Our largest manufacturing site is in Austin, Texas, where we employ
more than 2,700 people.
We develop and manufacture the tools that are used around the world to produce
semiconductor chips. Our products are multi-million-dollar systems that combine
physics, chemistry, materials science and other disciplines. Innovations in our
machines have enabled semiconductor producers to improve chip productivity and
performance while reducing cost per bit of information for more than two
decades. An easier way to remember us is that Applied Materials makes the
systems, that make the chips, that make the products, that change the world.
First, let me emphasize that our company and our industry has always been a
strong supporter of U.S. export controls that benefit U.S. national security.
We have worked hard to comply with these controls and to cooperate with the
government in its efforts to ensure that critical technologies do not fall into
the hands of our adversaries. As a market-leading, technology-driven company
with more than 60 percent of its sales outside the United States,
Applied Materials is vitally concerned with the U.S. export control system and
its administration.
Unfortunately, we too often find ourselves disadvantaged by U.S. export control
laws when competing against our Japanese and European rivals. Applied's
competitors in Japan, for example, have a license authority known as a
"general bulk license" (GBL). A GBL gives dual- use items immediate permission for export without
additional paperwork or processing - in effect a single stop for multiple
exports.
This ability particularly comes into play when looking at the China market. Our
Japanese competitors have used this bulk license to ship all the tools
necessary to equip Japanese semiconductor facilities in China. Meanwhile,
Applied must obtain individual licenses, which adds months of delay and
uncertainty, and requires significant additional documentation. With equivalent
technology
available from foreign suppliers, the end result is a loss of market share for
Applied Materials with absolutely no benefit to U.S. national security. Some
companies in our industry even need licenses to ship to friendly nations such
as Israel and Taiwan.
These are just some examples of an all too common occurrence. As this committee
has heard from numerous others, the U.S. export control system is in need of a
substantial overhaul. SEMI strongly supports safeguarding U.S. national
security through effective export controls. We believe a reauthorized EAA
should, at minimum, embody the following three attributes:
-- Multilateral. Export controls must be multilateral if they are to serve a
genuine national security purpose. Given the worldwide availability of
technology, unilateral controls are ineffective at best and quite often harmful
to the United States. This is certainly true in the semiconductor
equipment and materials industry. Today, it is possible to make the most
advanced semiconductors outside the United States without using a single piece
of U.S. production equipment. As is demonstrated in the charts attached to my
written statement, in every segment of the semiconductor production cycle U.S.
equipment suppliers face significant foreign competition. The issue remains, as
stated by Deputy Secretary of Defense Hamre: just because we can control an
item, does not mean we should control it. We need to measure the cost to U.S
industrial security in terms of lost sales and lost R&D revenues to maintain cutting edge technology versus the benefit to U.S.
national security of retaining controls. We also need to take account of the
economic and political benefits that accrue to the nation as a result of those
exports: jobs and growth on the one hand, and the free
flow of ideas and proliferation of democratic values on the other. While it is
tempting in our case to try to control these tools because they are
controllable, we do not advance national interests including national security
if our foreign competitors can ship equivalent technology.
-- Effective. Attempts to control widely available technologies or goods are
self defeating. Controls should be imposed only on those technologies that can
be controlled and should be controlled - so- called
"choke-point" technologies. Semiconductor manufacturing equipment does not fall under the
choke-point category, given its inherently generic nature and lack of any
direct contribution to military prowess. Despite the fact that semiconductor
production equipment and materials are designed and utilized for production of
mass market commercial chips, they are often lumped into the category of
"militarily critical" items simply because they represent advanced technology. Furthermore, Applied
Materials and other U.S. high-
technology, commercially driven companies must invest heavily in R&D to remain competitive. The only way to do this is to have access to
commercial markets around the world. Closing off markets and drying up revenue
sources that drive technological innovation in U.S. companies is precisely the
wrong way to enhance U.S. national security.
-- Evolutionary. As the current debate over the definition of a
"supercomputer" and
MTOP-levels illustrates, export control policies must be flexible and responsive to
evolving technological and commercial realities. There has been little change
in the export control parameters for the semiconductor equipment industry for
the last ten years. Export control policies and procedures should be reviewed
periodically for their overall impact on national security, U.S.
competitiveness and other U.S. interests.
I would like to add my praise to that of my colleagues on the witness panel
for the hard work and diligence this Committee and its staff have shown in
tackling this difficult and complex issue. Further, I believe that the
Committee's emphasis on the importance of multilateral controls and procedures
to address foreign availability in the bill is very encouraging. However, our
preliminary reading of the bill revealed several areas of substantive concern
that we believe must be addressed.
I am pleased that the Chairman indicated at the yesterday's hearing that we
will have more time to provide suggestions and seek clarification from the
Committee on these issues before proceeding to a mark-up of the legislation. We
look forward to continuing to be part of that process.
Moving from the general to the specific, let me now comment on the draft Export
Administration Act reauthorization legislation now being considered by the
committee.
Foreign Availability (Sec. 302(c)): First, as I mentioned, we are pleased that
the Committee has recognized in this section the principle that
foreign availability from a country that is within an existing control regime
such as Wassenaar is now a reality. However, SEMI urges the authors of the
draft bill to include an explicit mandate, as in previous EAA bills, removing
license requirements on items determined to be foreign available. The draft
bill, as written, seems to only allow foreign availability determinations be
"considered when developing the National Security Control List" (Sec. 301(c)(1)(A). This is an unsatisfactory result because it could lead to
protracted licensing requirements, despite acknowledged foreign availability.
How can that benefit U.S. national security?
We also are concerned that the draft bill grants certain federal departments
the right to petition the President to suspend foreign availability
determinations for two years in order to seek multilateral cooperation in
removing any such foreign availability (Sec.
302(f)(2)(A)). Given the pace of technological change, this two year window is
extremely problematic. Until a multilateral agreement is in place, foreign
availability determinations should be permitted to stand. In two years, a
foreign availability
"win" may not matter - with today's competitive environment, a two year delay could
be equal to a death penalty.
License Processing: We believe that the Committee is moving in the right
direction with license processing in such areas as the mass market exemption.
However, we are concerned that the procedures for determining a product's
status are unclear, and that the bill inadvertently provides too much
opportunity for bureaucratic delay. While we understand that the Committee's
objective is to allow objections to be heard, we believe that the requirement
for mandatory referral to all Departments and for consensus on all
classification and licensing decisions would grind the pace of decision-making to a halt. We say this, not to be an obstructionist, but because of our
experience in the trenches of the license application process. The Committee is
drafting a new paradigm for export controls that seeks to support the new
realities of our global economy. Unfortunately, we are afraid that many within
the day-to-day licensing process do not share your vision, and consequently may
use this consensus requirement as a means to slow the process or block action.
For example, we believe that semiconductor manufacturing gear is a perfect
candidate for the expedited list under the criteria as outlined in the draft.
Diversion of our tools is very difficult, not only because of the size of the
gear and the need to work with many other tools in a complex fabrication
process, but also because our companies provide extensive service and support
for the equipment. In short, our engineers know where the tools are and how
they are being
used in a semiconductor fabrication facility. But achieving bureaucratic
consensus on any item for the expedited list would likely be a major problem.
The notification in lieu of license provisions also raise questions. This new
form of export authorization offers the Commerce Department certain flexibility
in streamlining controls on items of limited risk. It may also alleviate some
strain on the Department's licensing resources. It is important, however, that
this pre-shipment notification requirement be used for its intended purpose -
to remove licensing requirements where appropriate. Permitting this form of
authorization to become a de facto licensing process, whereby items not
previously subject to licensing now become subject to pre-shipment
notification, would be a step backward.
Deemed Exports (Sec. 103(a)(11)(iv)): Unlike the EAA of 1979 or subsequent
EAA extensions, the draft bill would statutorily define domestic transfers of
technology to foreign nationals to be exports. The 1994
"deemed export" rule is overly broad. We believe that to be an export, there must be knowledge
and intent to transfer technology outside the U.S. This arrangement worked
satisfactorily during the Cold War, and there has never been a demonstrated
need to change.
In summary, Applied Materials and SEMI can support enactment of a revised
Export Administration Act if it will help clarify export control law,
rationalize the regulatory framework and provide the flexibility that meets
both national security and modern commercial and technological realities. We
appreciate the opportunity to be part of this process.
Thank you, Mr. Chairman. I would be pleased to answer any questions you might
have.
END
LOAD-DATE: June 26, 1999