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Nuclear Exporters Baffled by Proposed Rule
Posted By On April 24, 2012 @ 5:34 pm In News | Comments Disabled
The government’s attempt to clarify and streamline nuclear export rules may accomplish just the opposite, at least according to industry complaints.
A rule proposed  by the Department of Energy last fall would require specific authorization for nuclear technology exports to an additional 73 countries and requires those governments to vouch for nationals hoping to work in U.S. nuclear facilities.
Industry, which includes companies like GE Hitachi and AREVA, calls this an unexplained burden. The Department of Energy said it is trying to make things easier.
Current regulations  require U.S. exporters to seek authorization from the department to export unclassified nuclear information and civil technology to 77 specified countries, including Yugoslavia, which no longer exists. Export of nuclear technology is regulated for national security reasons and to support nonproliferation. Any country not listed is considered generally authorized.
But the proposed rule stands the list on its head.
Rather than revamping the negative approach, the new version instead lists the 48 countries that require no further authorization. Anything not listed requires specific government approval.
At first glance, Alex Polonsky, partner at Morgan, Lewis & Bockius LLP, thought this looked like a step in the right direction. Exporters could browse a less cumbersome listing for the destination country – if it’s not there, it needs authorization.
But the list would nearly double the destinations that require a government stamp, something the industry complains regularly takes longer than a year to get.
“It makes no sense that yesterday I could export commercial nuclear technology to Mexico or have a Mexican foreign national work in my plant without DOE’s prior approval, and the minute this rule becomes effective, I can’t,” Polonsky said.
Despite numerous calls and emails to the Energy Department, a representative from the department’s National Nuclear Security Administration was not available to comment by press time.
Carol Berrigan of the Nuclear Energy Institute, a policy organization that represents the nuclear industry, said past rule updates clearly stated why countries were added to the restricted list. But in the rule proposed Sept. 7, the government gives no explanation.
Richard Goorevich, senior policy advisor for the Energy Department’s Office of Nonproliferation and International Security, said in an online presentation in November that revisions are intended to harmonize  U.S. rules with Nuclear Suppliers Group Guidelines – however, Russia and China are members of that group and are considered restricted destinations under the proposed rule.
The rule would also regulate technology related to the transportation and storage of irradiated nuclear materials — a term the proposed regulation does not specifically define — for the first time. Generally speaking, the Energy Department regulates technology related to production of special nuclear material, which includes technology used for nuclear fuel production, isotope separation and purification of plutonium or uranium.
Public comments  on the rule were due in December, and the industry now awaits a revision from the Energy Department.
Companies are supposed to say where they export technology, even if specific authorization is not required.
Goorevich said in his November presentation that the Energy Department has received 35 of reports from companies and research facilities in the past three years regarding countries that would require specific authorization if the proposed rule is enacted.
The majority of the reports were for reactor consulting and engineering services in Mexico, Jordan and the Philippines.
Other reports regarded information or technology transferred to foreign nationals from 13 other countries that would be restricted, including the Bahamas, El Salvador and Malaysia.
As with many exports, jurisdiction for nuclear-related items is split across  agencies.
The Energy Department’s National Nuclear Security Administration controls technology and information under its Part 810 regulations, while the Nuclear Regulatory Commission controls nuclear equipment and materials under separate Part 110 regulations. The Commerce Department also has a say over some items related to nuclear production on the Commerce Control List.
Part 810 regulations execute authorization requirements in the Atomic Energy Act of 1954 as amended by the Nuclear Nonproliferation Act of 1978.
Over the decades, the nuclear industry has expanded globally, though the regulatory framework for exports was passed when U.S. companies were taking baby steps toward civil nuclear development.
The Commerce and State Departments are in the midst of a massive effort to streamline their own export rules for munitions and “dual use” items. The overhaul involves input from numerous agencies and departments and is intended to simplify a system that regulators themselves say is too confusing.
The Energy Department is not part of effort this and has instead started its own reform, acknowledging that the nuclear industry has changed since the last substantial regulatory overhaul in 1986.
In public comments to the proposed rule, the Nuclear Energy Institute notes that 434 nuclear reactors are operating worldwide, along with 64 under construction and 155 in the planning stages – including to countries like China, Russia and India, which require specific authorization under both current and proposed regulations.
For exports to restricted locations, the foreign government is required to verify in writing that it will only use nuclear technology for peaceful purposes and won’t retransfer technology or information without permission.
The authorization process is already time-consuming. Expanding requirements to currently permitted countries could amplify the burden.
“It takes a year to get this right now without the extra 73 countries and the expansion of technologies. I can’t imagine that time lag will be reduced,” said Berrigan, who is NEI’s senior director for industry infrastructure and supply chain.
In a letter to Goorevich, GE Hitachi Nuclear Energy Americas, LLC said expansion of restricted countries under the proposed rule would “significantly harm” U.S. suppliers’ ability to compete internationally.
“General authorization” applies to non-classified civil technology and does not apply to military items or technology related to sensitive nuclear material, which includes technology used for uranium or plutonium enrichment.
Countries like India, Russia and China have nuclear industries already, but exporters must get U.S. government approval to share technology or information. Competitors in countries like South Korea can get products there faster, so U.S. companies say they lose out.
“The U.S. nuclear industry has to ask ‘mother may I’ to DOE before it can export to China, for example,” Polonsky said. “China already has commercial nuclear technology. It’s not like we’re giving them something new.”
GE Hitachi — which is itself an alliance of an American company and a Japanese company — said it is particularly concerned about proposed restrictions on Mexico, where it provides hardware and technical support to nuclear reactors run by Comisión Federal De Electricidad.
Shipments abroad aren’t the only problem.
If a U.S. company wanted to hire a Mexican national to work with technology or information covered under Part 810 in the United States, the regulation requires the company to wait for the government stamp as if it were sending a shipment abroad. The rule applies not only to employees in nuclear facilities but also to workers at research universities.
Approval for these “deemed exports” is already required in practice but is explicitly stated in the proposed rule as a requirement for nationals from restricted countries. Polonksy said the wait can exceed a year and a half before an employee can access parts of a plant that aren’t open to the public.
Sharing information with foreign nationals is also considered an export, meaning a citizen of a restricted foreign country may be unable to see non-public parts of a U.S. facility without clearing the lengthy approval process.
The Nuclear Energy Institute, which represents about 300 industry members, is also concerned that the proposed rule omits current fast-track approval for information related to safety. The Energy Department’s filing said the authorization has rarely been used and has been confusing to companies.
Even amid complaints that the update would expand regulations, the proposed rule is notably silent on some issues.
Ajay Kuntamukkala, partner at Hogan Lovells said the revisions give no guidance on how a foreign national with dual citizenship would be treated, or how technology would be regulated if it is jointly developed by employees in the United States and employees abroad.
In the end, the comments from industry show a disconnect between the government’s idea of better regulation and how companies think the rules should actually be streamlined. A second proposed rule is expected before the Energy Department finalizes Part 810 regulations.
“The proposed rule doesn’t solve the clarity problem, doesn’t solve the efficiency problem and doesn’t solve the transparency problem and adds a host a host of other problems,” Berrigan said.
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