Will U.S. Cut Hydraulic Fluid Sales to China?


U.S. companies that export synthetic hydraulic fluids to China may have to think twice about doing so in the future if the federal government adopts a rule drafted by the Bush administration.

The Department of Commerce recently proposed new export license requirements aimed at inhibiting the advance of Chinas military. At least one business group criticized the proposal as onerous and ineffective.

The draft rules were unveiled July 6 in the form of proposed revisions and clarifications to existing regulations concerning exports and re-exports to China. Government officials said they were written to ensure China uses U.S. products for civilian, not military uses. Under Secretary of Commerce David McCormick said the goal is supporting American companies in competing in the vast Chinese market for civilian technology while preventing the export of technologies that contribute to Chinas military modernization.

The proposal would apply to a wide range of products – from uranium to aircraft, certain fibers and computers. It also applies to hydraulic fluids made from synthetic hydrocarbons. U.S. exporters of such materials would have to verify that their products do not end up being used for military purposes.

The National Foreign Trade Council, a Washington, D.C.-based association of businesses, has already stated its opposition to the rule. Its president, William Reinsch, told Lube Report yesterday that the rule would have little practical impact on Chinas military because the European Union, for example, has no such restriction.

When the government comes in and says, You have to figure out if this product is going to a military end-use, Reinsch said, thats an ambiguous requirement, and it puts an enormously difficult burden on mid-level company compliance personnel who are going to have to worry about [regulators] from the enforcement office showing up in a year to say, You got it wrong.

The Department of Commerce will accept comments on its proposal until Nov. 3 and must consider those in issuing a final rule. The full text of the proposal can be viewed at: http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/E6-10504.pdf

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