For over half a century U.S. policy has walked the line between trying to facilitate the exchange of technology so nuclear energy can fulfill its civilizing promise and combating the threat that nuclear know-how may escape control and unleash terrible destruction. The approach remains true to the aspiration of the Nuclear Non-Proliferation Treaty (NPT) to prevent the spread of nuclear arms while upholding the right of states to use nuclear technology for peaceful purposes. 

In practice, this has meant that the U.S. government has needed the cooperation of private industry to effectively prevent nuclear technology from getting into the wrong hands. Ideally, efforts to control the spread of nuclear materials, equipment, and know-how do not significantly impede legitimate commercial activities that share the benefits of fission energy. In reality, it’s not so simple. 

Mark Hibbs
Hibbs is a Germany-based nonresident senior fellow in Carnegie’s Nuclear Policy Program. His areas of expertise are nuclear verification and safeguards, multilateral nuclear trade policy, international nuclear cooperation, and nonproliferation arrangements.
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Since 2009, the Obama administration has struggled to balance security interests and commercial realities in setting new policy directives for the negotiation of future bilateral nuclear cooperation agreements between the United States and foreign countries. At the same time, it has been carrying out a timely overhaul of U.S. rules governing the transfer of nuclear technology to foreign nuclear programs. It took four years to review these regulations and find a balance between U.S. nonproliferation objectives and private stakeholders’ interests in sharing know-how with international partners. Assuming that stakeholders and the government concur that relatively few adjustments need be made to new rules proposed by the U.S. Department of Energy (DOE), the revised regulations will be published in the U.S. Congressional Record and thereby enter into force.

The DOE first proposed new rules for technology transfer in September 2011. The draft prompted a barrage of objections from U.S. industry. In August 2013, the DOE issued a revised set of rules that in significant ways accommodated exporters’ ambitions without compromising U.S. security interests. 

The Rationale

At issue when it comes to these regulations is what actions must be taken under U.S. law to permit individuals or entities to contribute to the production of nuclear materials—chiefly enriched uranium and plutonium—outside the United States. Such activity is unlawful under Section 57(b) of the U.S. Atomic Energy Act (AEA) unless the secretary of energy determines that the activity will not be inimical to U.S. interests. 

To inform decisions about whether technology transfers are consistent with U.S. interests, the Code of Federal Regulations, in its so-called 10 C.F.R. Part 810, establishes a list of destinations that have programmatic “general authorizations” to obtain restricted U.S. technology. It provides for more limited “special authorizations” to permit others to obtain U.S. know-how. These rules were last amended in 1986. 

The administration began its comprehensive revision of Part 810 for good reasons. During the last thirty years, new technologies have emerged, as have new global business models. More and more technology transfer takes place using e-mail, the Internet, and computer files. In part thanks to an increase in nuclear black marketeering and transit trade, today’s nuclear trade map has many more potentially risky destinations for nuclear technology exports.

Legitimate interest in nuclear technology has also spread beyond a small number of relatively advanced nuclear programs to many developing countries. Today, well over 100 countries are taking advantage of nuclear-science applications, and many are engaged in some kind of nuclear research. Perhaps half of these will in coming decades be using nuclear reactors to generate electricity.

The Changes

Because of these developments, the administration has proposed a number of changes to Part 810. 

Consistent with U.S. export guidelines for nuclear materials and equipment, the draft new Part 810 is more specific about what technologies and activities are subject to controls. It includes technology for nuclear chemical processing, uranium enrichment, storage and movement of irradiated materials, high-level waste processing, equipment, and nuclear reactors. Specifically exempt from licensing requirements are technology for nuclear-fusion reactors, uranium and thorium milling, information that is publically available, and information for basic scientific research.

The current Part 810 includes a list of countries that require “special authorization” to permit U.S. know-how to be used in their nuclear programs. All other states are automatically considered eligible. The new Part 810 would reverse this by setting up a list of countries with general authorizations. All of those not on the list would have to apply for more limited special authorization.

The DOE has proposed that 46 countries be placed on the generally authorized destination list. All of these are covered directly or indirectly by a bilateral nuclear cooperation agreement with the United States under Section 123 of the AEA, a so-called 123 agreement. All but one of the 46 has a comprehensive safeguards agreement with the International Atomic Energy Agency (IAEA). The exception is Taiwan, which has de facto comprehensive safeguards under an arrangement it has with the IAEA and the United States. 

The new proposed Part 810 also expressly conforms to other U.S. export control regulations by making clear that restrictions extend to “deemed exports”—that is, transfers of technology to foreign nationals working in the United States.

And the proposed regulation modifies a “fast track” for providing safety-related assistance to countries that require a special authorization. Authorization would be given only in cases where an export provides assistance in the case of a radiological emergency.

Striking a Balance

Since 2010, the DOE and private stakeholders have not agreed about what should be in the new rules, ultimately because U.S. law says that policy should be informed by commercial and security goals that potentially conflict. Section 1 of the AEA says that U.S. policy concerning the “development, use, and control of atomic energy shall be directed so as to . . . improve the general welfare, increase the standard of living, and strengthen free competition in private enterprise”—language that supports industry’s objection to burdensome rule making. But Section 1 also says that the goal of “improving general welfare” must be “subject at all times to the paramount objective of making the maximum contribution to the common defense and security.” Nuclear commerce must therefore ultimately be circumscribed by efforts of the U.S. government to prevent the spread of sensitive know-how. 

When the DOE submitted an initial draft of new regulations to private sector stakeholders in September 2011, firms asserted that the proposed changes contravened the AEA. The proposed rules, they argued, did not support U.S. companies competing for business in foreign civil-nuclear-reactor markets, and they set up administrative procedures that would be lengthy, opaque, and costly. More than in the past, companies said, regulations must not penalize vendors whose exports create jobs. The Nuclear Energy Institute, the nuclear industry’s main lobby group, cited U.S. Department of Commerce findings that the global nuclear market will be worth as much as $740 billion during the next decade alone. How much of that market is secured by U.S. industry, the Nuclear Energy Institute told the DOE, will depend in part on how its export business is regulated.

Firms objected that the new approach, requiring that all countries not on a list of destinations with programmatic approval must obtain special authorizations, would result in 77 more countries subject to DOE red tape, delaying U.S. firms’ entry into potential markets. They also complained that the new scope of controls would include technologies with no relevance to making nuclear material or to proliferation threats and that the licensing process is unclear and not transparent.

The DOE took actions to respond to key industry objections. 

To help ensure that the new regulations would not be overly burdensome on business as usual, the DOE initiated a program to make the licensing process compliant with the International Organization for Standardization (ISO) 9001 standard, an international quality management standard designed to help organizations eliminate errors and cut waste and redundant paperwork. Because the granting of authorizations is frequently delayed by long response times from foreign governments, U.S. government agencies are separately considering measures to improve timeliness. The DOE also vowed to reduce time frames for U.S. government agency license reviews; set up an electronic licensing system to provide more uniform and transparent authorization standards and practices; publish information on licensing decisions; and create expedited procedures for the authorization of activities that present the lowest proliferation risk under criteria that the new Part 810 will propose.

In response to industry objections that a proposed five-year time limit for specific authorizations was arbitrary and that the term of authorizations should depend on specific circumstances, the DOE dropped that plan and instead agreed to fix terms on a case-by-case basis.

The DOE clarified that a 123 agreement would not be a formal legal requirement for the transfer of technology. Mexico and Chile currently benefit from nuclear cooperation with the United States without a 123 agreement because they each have a project and supply agreement with the IAEA, which in turn has a 123 agreement with the United States. Under the proposed Part 810, these two states continue to have access to U.S. know-how on the basis of their positive risk profile, which includes NPT membership and IAEA Additional Protocols accompanying their safeguards agreements.

The DOE also heeded advice from industry not to eliminate the “fast track” general authorization for safety-related assistance to foreign commercial reactors. And it agreed to modify its proposal on “deemed exports” to generally authorize technology access for citizens from countries with specific authorizations employed at U.S. nuclear facilities, provided that employers cooperate by carefully vetting personnel.

Steps Too Far

Some industry objections, however, appeared to be overreaching. The DOE has rejected industry’s plea to retain the current policy of awarding general authorizations to all but a limited number of designated destinations. The DOE’s logic for making that change appears to be sound, and the impact of the new practice on firms should be limited.

Under the proposed Part 810, the authorization status of 117 countries as export destinations does not change. Forty-four major U.S. nuclear trading partners that are already recognized remain generally authorized. Seventy-three states currently requiring special authorizations remain subject to that determination in light of security and nonproliferation concerns. 

The new list of 77 countries deprived of their previous general authorizations is overwhelmingly dominated by countries that are engaged in little or no nuclear commerce, have no 123 agreement, and lack experience in managing proliferation issues. The absence of a general authorization in these countries should therefore hardly disadvantage U.S. exporters. An economic analysis carried out by the DOE concluded that the potential nuclear market value of these 77 countries is just half of the estimated market value in three countries—Kazakhstan, the United Arab Emirates, and Ukraine—that under the new rules would no longer require specific authorizations but will be awarded general authorizations.

The DOE assured U.S. industry that when countries on that list of 77 that would require special authorization—such as Malaysia and Saudi Arabia—prepare to order and construct nuclear-power reactors, their status can be reassessed and they can be awarded general authorization for receipt of U.S. technology. 

Ten years ago, Malaysia unwittingly served as a platform for Pakistani nuclear scientist A. Q. Khan to secretly make uranium enrichment equipment and then smuggle it to Iran and Libya. Malaysia’s general authorization under Part 810 provided an avenue for Khan’s partners to tap into U.S. nuclear know-how. That loophole would be closed if countries without experience in combating proliferation were required to seek a special authorization under the new Part 810. 

Also for good reasons, the DOE did not agree with U.S. nuclear exporters that China and Russia—both which have 123 agreements with the United States—should benefit from programmatic general authorizations. Reluctance is justified by the lack of transparency in these countries and in view of the absence of a clear separation between peaceful and military nuclear activities. For similar reasons, some other nuclear-technology exporters—the European Union countries and Japan, for example—likewise limit these destinations’ access to nuclear know-how. 

In asserting that China and Russia should be awarded general authorizations, U.S. industry pleaded in effect that the commercial opportunity and volume of trade with these countries is more important than U.S. security considerations. That’s shortsighted. Exporting technology to China or Russia carries more potential risk than exporting technology to Denmark. The significance of the Russian and Chinese nuclear programs, however, should in fact compel the DOE and industry to find ways of facilitating authorizations for these important destinations without compromising legitimate security concerns. 

Keeping Best Interests in Mind

In coming weeks, the fine print of the new Part 810 will be set in stone on the basis of the arguments of high-powered corporate and government lawyers. Since August, U.S. firms have prepared a flurry of additional objections. Some pertain to the DOE’s handling of China and Russia; to the government’s finding that India, on legal grounds, should not be generally authorized; and to the DOE’s proposed “deemed export” provisions.

The AEA implies that the U.S. government, in evaluating whether the transfer of technology to a foreign nuclear program is consistent with U.S. interests, should consider both national security and commercial factors. The DOE’s proposed new Part 810 is generally consistent with what the AEA declares to be the aims of U.S. policy.

The DOE has scheduled one more discussion with stakeholders in mid-October. Legalese may prevail on that occasion, but it’s the big picture that should matter. The DOE must understand that if U.S. government security rules and administrative procedures deter U.S. companies from competing effectively against foreign firms, U.S. nonproliferation and security interests will be damaged. In that case, U.S. suppliers will not be present in foreign markets, and foreign governments will not be motivated to heed U.S. concerns. At the same time, exporters must know that they are best served if commercial interests do not pose security risks that translate into future liabilities. That’s especially the case for destinations where there are concerns about the possibility of diversion into nuclear weapons programs, the effectiveness of export controls, and the protection of intellectual property.