27. End Use Verification for PRC Use of HPCs
    
    The Select Committee recommends that the appropriate congressional committees report legislation that requires:
    • As a condition to U.S. HPC export licensing, the establishment by the PRC of an open and transparent system by September 30, 1999, which provides for effective end-use verification for HPCs sold or to be sold to the PRC and, at a minimum, provides for on-site inspection of the end-use and end-user of such HPCs, without notice, by U.S. nationals designated by the U.S. Government.
    • Failure to establish such a system by that date should result in the U.S. Government's lowering the performance level of HPCs that may be exported to the PRC, the denial of export licenses for computers destined to the PRC, or other appropriate measures.
    • An independent evaluation of the feasibility of improving end-use verification for HPCs in the PRC, and preventing the use of such HPCs for military purposes.
28. U.S. Leadership for Multinational HPC Export Policies
    
    The Select Committee recommends that the appropriate congressional committees report legislation that requires efforts by the Executive branch to encourage other computer-manufacturing countries, especially those countries that manufacture HPCs, to adopt similar policies toward HPC exports to the PRC.
    
    Export Legislation and Other Technology Controls
    
    The Select Committee believes that it is in the national interest to encourage commercial exports to the PRC, and to protect against the export of militarily sensitive technologies. To this end:
    
    
29. Reauthorization of Export Administration Act
    
    The Select Committee recommends that the appropriate congressional committees report legislation to reenact the Export Administration Act, with particular attention to re-establishing the higher penalties for violation of the Act that have been allowed to lapse since 1994.
    
    
30. Prioritization of National Security Concerns With Controlled Technologies; Continuous Updating
    
    Relevant Executive departments and agencies should establish a mechanism to identify, on a continuing basis, those controlled technologies and items that are of greatest national security concern.
    
    
31. Executive Department Approvals for Exports of Greatest National Security Concern
    
    With respect to those controlled technologies and items that are of greatest national security concern, current licensing procedures should be modified:
    
    
    • To provide longer review periods when deemed necessary by any reviewing Executive department or agency on national security grounds; and
    • To require a consensus by all reviewing Executive departments and agencies for license approval, subject to appeal procedures.
    
    
    
32. Streamlined Licensing Procedures
    
    With respect to controlled technologies and items that are not of greatest national security concern, current licensing procedures should be modified to streamline the process and provide greater transparency, predictability, and certainty.
    
    
33. Effect of Maintaining Looser National Security Controls for Hong Kong Since Its Absorption by PRC on July 1, 1997
    
    The Select Committee recommends that appropriate congressional committees report legislation requiring appropriate Executive departments and agencies to conduct an initial study, followed by periodic reviews, of the sufficiency of customs arrangements maintained by Hong Kong with respect to the PRC and the appropriateness of continuing to treat the Hong Kong S.A.R. differently from the PRC for U.S. export control purposes. Such a study should consider, among other things, the implications of unmonitored border crossings by vehicles of the People's Liberation Army.
    
    
34. Mandatory Notice of PRC or Other Foreign Acquisition of U.S. National Security Industries
    
    The Select Committee recommends that appropriate congressional committees report legislation amending the Defense Production Act of 1950 to require notice to the Committee on Foreign Investment in the United States (CFIUS) by all U.S. companies that conduct national security-related business of any planned merger, acquisition, or takeover of the company by a foreign entity or by a U.S. entity controlled by a foreign entity. The amendment also should require Executive departments and agencies to notify CFIUS of their knowledge of any such merger, acquisition, or takeover.
    
    Intelligence/Counterintelligence Issues
    
    
35. Comprehensive Counterintelligence Threat Assessment of PRC Espionage
    
    Supplementing its recommendations with respect to security at the National Laboratories, the Select Committee further recommends that Executive departments and agencies with counterintelligence expertise undertake a comprehensive counterintelligence threat assessment of PRC espionage targeted against U.S. public and private entities.
    
    
36. Legislation to Improve Sharing of Sensitive Law Enforcement Information within the Executive Branch
    
    The Select Committee recommends that appropriate congressional committees report legislation to authorize and direct the Department of Justice to promptly share national security information, on a classified basis, with appropriate Executive departments, agencies, and entities. To achieve this objective, the Select Committee recommends the creation of an appropriate interagency mechanism.
    
    
37. Five-Agency Inspectors General Examination of Countermeasures Against PRC Acquisition of Militarily Sensitive Technology
    
    The Select Committee recommends that appropriate congressional committees require the Secretaries of State, Defense, Commerce, and the Treasury and the Director of Central Intelligence to direct their respective Inspectors General to investigate the adequacy of current export controls and counterintelligence measures to protect against the acquisition by the PRC of militarily-sensitive U.S. technology, and to report to Congress by July 1, 1999, regarding their findings and measures being undertaken to address deficiencies in these areas.
    
    
38. All-Source Intelligence Analysis of PRC Plans for Technology Acquisition
    
    The Select Committee recommends that appropriate congressional committees report legislation directing the Intelligence Community to undertake and maintain a current, all-source analysis of PRC aims, goals, and objectives with respect to the acquisition of foreign, and particularly U.S., technologies, including, for example, PRC efforts to exploit the open character of U.S. society by penetrating businesses, academic and social institutions, and political practices. Such legislation should include a requirement to report on the adequacy of resources, encouragement, and priority status accorded all-source intelligence collection and analysis by relevant Executive departments and agencies concerning the PRC and PRC counterintelligence.
    
    

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