Deemed Exports Overview and the Deemed Exports Overview and the Inspector General’s ReportInspector General’s Report

Presentation for :Presentation for :

Office of National Security and Office of National Security and Technology Transfer ControlsTechnology Transfer ControlsBureau of Industry and SecurityBureau of Industry and SecurityU.S. Department of CommerceU.S. Department of Commerce

NCURA Region VTulsa, OK

April 12, 2005

March 15, 2005

Overview• Introduction to Deemed Exports• Sequence of Analysis• Key Issues for Research Community• University/Research/Government

Partnership• IG Report on deemed exports: http://www.oig.doc.gov/oig/reports/2004/BIS-IPE-16176-03-

2004.pdf

What is a Deemed Export?

• Release in the United States of technology or source code subject to the Export Administration Regulations to a foreign national.

• Such release is “deemed” to be an export to the home country of the foreign national.

Security Concern Regarding Deemed Exports

• Deemed exports are an important part of the overall mission of BIS to control exports and reexports of sensitive U.S. technology to destinations of concern.

• Foreign governments may seek to gather sensitive technology in the United States.

The Deemed Export Issue

Situations that can involve release of U.S technology or software include:

1. Tours of laboratories2. Foreign national employees involved in certain

research, development, and manufacturing activities

3. Foreign students or scholars conducting research

4. Hosting of foreign scientist

The Deemed Export Issue

Summary:• Requirement for license is driven by

the sensitive nature of technology, access required to that technology, and the foreign national’s country of origin.

U.S. Citizens/Green Card/Protected Immigrants

Publicly Available

Educational InformationPatents

Fundamental Research (FR)

EAR 99

License Exceptions

License

Sequence of Analysis

Exempted from the Rule

• Foreign nationals are exempt from the deemed export rule in the following cases:

– A foreign national granted U.S. citizenship;

– A foreign national granted permanent residence status (i.e., “Green Card” holders);

– A foreign national granted status as a “protected individual” under 8 U.S.C. 1324b(a)(3). Protected individuals include political refugees and political asylum holders.

Other Licensing Exemptions

• Publicly available (EAR 734.7)- Generally accessible to the interested public- Periodicals, books, print, electronic other media forms- Libraries (university, public etc)- Open patents- Open conferences

• Educational information (EAR 734.9)- Released by instruction in catalog courses- Associated teaching laboratories of academic institutions

• Patent information (EAR 734.10)- Public information available on patent application

• Fundamental Research (EAR 734.8)- Basic and applied research where resulting information is

ordinarily published and broadly shared within scientific community

Classify the Technology:

• Most technology is not controlled (EAR99)

• Sensitive technologies are controlled, based on specific Export Control Classification Numbers (ECCNs) in the Commerce Control List.

• Controlled technologies may require licensing based on the foreign national’s country of origin.

License Exceptions:

• License Exception TSR allows export of “national security” technology to many countries.

• License Exception CTP allows the export of computer technology.

Licenses:

• The large majority of deemed export license applications are granted: in FY2004, the Bureau approved 85%, returned without taking action approximately 14%, and denied 1% of the total of 995 deemed export license applications.

• Licenses are generally processed in about 45 days, under an Executive Order.

Key Issues for Research Community

• Use of controlled equipment versus transfer of controlled ‘use’ technology

• Scope of Fundamental Research

• Country of Origin

Clarification of “Use” technology

• The use of controlled equipment is not a deemed export. Deemed exports occur only if controlled technology is transferred.

• The term “technology” as used in the EAR refers to specific information necessary for the “development,” “production,” or “use” of a specific product (e.g. computer, fermenter, machine tool, etc.).

• The regulatory definition of “use” is technology for “operation, installation (including on-site installation), maintenance (checking), repair, overhaul and refurbishing.”

• IMPORTANT NOTE: Whether such “use” technology is controlled in a particular situation depends on the specific technology involved, as detailed in the relevant Export Control Classification Category Number (ECCN).

Clarification of “Use” technology

IG Recommendation:– The IG Report recommended that BIS revise

the definition of “use” technology and replace the word “and” with the word “or” to clarify that controlled “use” technology does not have to be related to all of the listed activities.

– BIS has stated that it would examine the issue.

– IMPORTANT NOTE: Any change to the regulation would be subject to a formal rule-making process in which all interested parties would have an opportunity to comment.

Clarification of “Use” technology

Fundamental Research

• EAR 734.8 Information resulting from fundamental research:

“Fundamental research is basic and applied research in science and engineering where the resulting information is ordinarily published and shared broadly within the scientific community.”

Fundamental Research

• The fundamental research exception only applies to information that “arises during or results from” the research.

• There is no “blanket exemption” for all information that is transferred in the context of such research.

Fundamental Research

World of ResearchUncontrolled Technologies

Controlled Technologies

INPUTS OUTPUTS

x

x

xx

x

xx

x

xx

xx

Information resulting from fundamental Research

x

xx

x

xx

x

IG Recommendation:– The IG recommended modifying the current

policy of recognizing the foreign national’s most recent country of permanent residency (non-U.S.) and citizenship (non-U.S.) for purposes of determining deemed export licensing requirements.

– This revision would not apply to naturalized U.S. citizens or foreign nationals that have achieved permanent resident status in the U.S. These citizens remain protected and exempt.

– Any change would be subject to the formal rule-making process.

Country of Origin

University/Research/Gov’t Partnership

• To safeguard U.S. national security and protect fundamental research, agencies and the research community must have a system that focuses carefully on sensitive technologies.

• Knowledge of the rule (not self-blinding) means due diligence which includes the establishment of a process for identification, review, and commodity classification.

• BIS stands ready to assist with commodity classification of any technologies and applying these rules.

Federal Register Notice

• BIS intends to publish the week of March 14• Advanced Notice of Propose Rulemaking• Requesting public comment on three

recommendations of the March 2004 IG Report:– Definition of “use” technology– Licensing policy for third country nationals based on

country of birth.– Revision to Questions and Answers in Export

Administration Regulations on fundamental research and government research

• Public comment period will last for 60 days from date of publication of the notice.

Deemed Export and Electronics Division Contact Information

Bernard Kritzer Alex LopesDirector, Office National Security Director, Deemed Export andand Technology Transfer Controls Electronics DivisionPhone: 202-482-4196 Phone: 202-482-4875Email: bkritzer@bis.doc.gov Email: alopes@bis.doc.gov

Bob Juste Kurt FranzSenior Engineer/Licensing Officer Policy Analyst/Licensing OfficerPhone: 202-482-2845 Phone: 202-482-2278E-mail: rjuste@bis.doc.gov E-mail: kfranz@bis.doc.gov

Todd WillisSenior Export Policy AdvisorPhone: 202-482-9163E-mail: twillis@bis.doc.gov

Office Fax: 202-482-1373

DOC Bureau of Industry and Security Website: www.bis.doc.gov

Bureau of Industry and Security