On February 17, 2007, China’s State Council published an update to the country’s regulations governing the export of nuclear-related dual-use goods. [1] This revision followed modifications to a separate set of regulations controlling the export of nuclear-specific commodities in November 2006. [2] Combined, these revisions to China’s nuclear-related export controls addressed a number of issues that have proved to be significant challenges to the nuclear nonproliferation regime, including nuclear terrorism; the spread of highly enriched uranium (HEU) and sensitive uranium enrichment and plutonium production technologies; and the control of transshipments through China and intangible technology transfers (ITT). The revised nuclear-related regulations also added language that clarifies the penalties for export control violations and established requirements for China’s domestic industries to develop and maintain internal compliance programs. The two sets of revisions taken together could significantly strengthen China’s control over nuclear-related exports and put Beijing closer to meeting its obligations under the guidelines of the Nuclear Suppliers Group (NSG) and UN Security Council Resolution 1540 (UNSCR 1540). (Editor’s note: The NSG is an arrangement among 45 states (including China) to implement uniform export controls on nuclear-related commodities and technology; UNSCR 1540, adopted in April 2004, requires all UN member states to put in place effective export controls on weapons of mass destruction (WMD) and related commodities.)

The first set of revisions to China’s export regulations covering nuclear-specific commodities were signed into law by Premier Wen Jiabao on November 9, 2006, and published by the State Council on December 1, 2006. [3] These regulations – first published in 1997 – control the transfer of nuclear materials and equipment and non-nuclear commodities that are especially designed or prepared for use in nuclear facilities. [4] One notable change evident in the November 2006 revisions is the increased oversight placed on HEU-related exports. (HEU is potentially usable for nuclear weapons and would be easier for non-state groups to use for this purpose than plutonium because the weapon can be based on a simpler design. HEU is defined as uranium enriched to more than 20 percent of the most easily split uranium isotope, uranium-235.) According to the revised regulations, the government of the entity importing Chinese-origin uranium enrichment facilities and technologies must guarantee to the Chinese government that they will not be used to produce uranium enriched to a level of 20 percent or more without China’s express consent. [5] The revised regulations also increase controls on “uranium enrichment facilities and equipment,” and on facilities that could be used in the production of plutonium, namely, “irradiated fuel reprocessing facilities and equipment, heavy water production facilities and equipment, and their related technologies, as well as materials that can be used in nuclear weapons or other nuclear explosion devices.” [6]

Revisions Aimed at Nuclear Terrorism
In accordance with the guidelines of the Nuclear Suppliers Group and UNSCR 1540, China is beginning to focus added attention on the issue of nuclear terrorism. [7] The November revisions marked the first time that China’s export controls addressed this issue explicitly. In an opening article of the nuclear-specific export regulations, “guarding against nuclear terrorist acts” has been added as one of the primary purposes of these controls. [8] On a functional level, the revised regulations issued by the State Council added language that enables China’s licensing authorities – i.e., the Ministry of Commerce (MOFCOM) or the Commission of Science, Technology, and Industry for National Defense (COSTIND) – as well as the Ministry of Foreign Affairs, to halt any transaction “if there is the danger of nuclear proliferation or nuclear terrorism.” [9] The State Council is the highest body in the Chinese government’s executive branch, and government ministries and specialized agencies fall under its authority. MOFCOM is the primary licensing body for dual-use exports, and COSTIND, through its subsidiary agency the China Atomic Energy Authority (CAEA), has licensing authority for the export of nuclear materials.

This increased focus on nuclear terrorism was also reflected in the February 2007 revision to the nuclear dual-use export regulations. [10] This revision added language on the issue of nuclear terrorism that mirrored the language contained in the revised nuclear-specific export regulations, including the stipulation that Chinese export control authorities may halt any transfers that represent a nuclear terrorism risk. Bearing in mind that all Chinese export controls also include catch-all clauses, the revised regulations effectively allow Chinese authorities to stop the transfer of any item or technology, even those not listed on nuclear export or nuclear dual-use export control lists, if there is reason to believe that the items are intended to be utilized by governments or non-state actors for the manufacture of nuclear weapons. [11]

Revised Regulations – First on Transshipments and ITT
Both the November and February revisions also address the complex issue of controlling items entering China’s territory en route to other destinations that are often exempt from certain customs requirements. Although this issue had been previously handled by directives from MOFCOM and China’s General Administration of Customs (GAC), the revised regulations constitute the first time that the State Council has formally provided guidance on how to handle these transshipments. UNSCR 1540 specifically identifies measures to regulate transshipments as a needed element of an effective export control system. As part of China’s efforts to incorporate the requirements of UNSCR 1540 into its domestic regulations, the recent revisions to China’s nuclear-related export controls include articles stipulating that the regulations now apply to special customs areas, such as bonded warehouses and special export processing zones, as well as to items transiting China. [12] With Chinese ports, such as Tianjin and Shanghai, becoming major hubs for international shipping, it has become increasingly important to the viability of China’s strategic trade control system that strong domestic transshipment rules be put in place. According to an export control official interviewed by China’s Xinhua News Agency, the increased focus on transshipment and other related issues is meant to prevent China from becoming a conduit for the proliferation of sensitive WMD-related technologies. [13]

In another move to cope with one of the more complicated aspects of strategic trade control, the February revision of the nuclear dual-use export regulations formally addressed the issue of intangible technology transfers (ITT) for the first time. The term ITT refers to a number of modes of knowledge transfer, including software and email exchanges. These methods of transferring sensitive information have proven to be a significant challenge for nonproliferation export controls. In an attempt to meet this challenge, Beijing revised its regulations to clarify the issues surrounding the control of technology transfers by noting that software or other forms of knowledge transfers also fall “within the scope of dual-use nuclear goods and related technologies.” [14]

Exporter Responsibilities and Possible Penalties
China’s revised nuclear-related export control regulations have also placed additional responsibilities on exporters and domestic industry to maintain viable internal compliance programs to avoid inadvertent export control violations. Both sets of revised regulations enable the GAC to allow exporters to by-pass the nuclear-related export licensing process only if they obtain certification from MOFCOM indicating that a particular export is not considered a controlled nuclear-related item. [15] Additionally, the February revisions of the nuclear dual-use export regulations increase compliance requirements on industry by formalizing the concept of “comprehensive controls” within China’s export control system, including the “catch-all” requirement allowing Chinese authorities to stop the transfer of any item or technology it deems problematic. Thus, under the revised regulations “[e]xporters who are aware, or should be aware, or obtain a notification from the Ministry of Commerce” that the item they wish to transfer is a nuclear proliferation risk must apply for an export license, even if the item in question is not included on any control lists. [16] Additionally, exporters are now expected under the revised regulations to “establish and perfect” internal export control compliance programs and are required to retain in their files the relevant documents, such as contracts, invoices, receipts, and business letters, pertaining to nuclear-related transfers for at least five years. [17]

Previous versions of these two sets of regulations gave few details about the type of punishment that would be handed down for those found guilty of violating China’s nuclear-related export control laws, noting only that violators would be punished “according to law.” [18] In contrast, the revised regulations add significant detail to the level of administrative punishments required under the law. According to the revisions, MOFCOM shall fine violators “no less than twice but no more than six times the amount involved in the illegal transaction;” the regulations add that if the amount of the transaction is less than ¥50,000 (approximately $6,500), officials shall levy a fine of at least ¥50,000 but no more than ¥250,000 (approximately $32,500). [19]

Conclusion
Beijing’s control over its nuclear-related exports has been considered more effective than that covering other sensitive sectors. The level of confidence that other major nuclear suppliers have in Beijing’s export controls for nuclear-related commodities was evident in 2004 when China was allowed to become a member of the NSG. In contrast, China has not been invited to join the Missile Technology Control Regime, due to concerns about China’s missile-related export controls. Moreover, although Beijing’s nuclear-related controls are considered by the international community to be improving, China’s export control bureaucracy still confronts problems of capacity and limited resources. While the new regulations are a positive step, the ability of Beijing to implement fully these enhanced nuclear controls will depend on how well it can overcome these limitations.


Stephanie Lieggi - Monterey Institute Center for Nonproliferation Studies