deemed exports texas a&m april 10, 2008 alex lopes director, deemed exports and electronics...

Deemed ExportsTexas A&M

April 10, 2008

Alex LopesDirector, Deemed Exports and

Electronics Division

Deemed Export Agenda

What are deemed exports? Key policy issues Licensing process Process Improvements

Path Ahead

What are “Deemed Exports”

The Export Administration Regulations (EAR) define a deemed export as the release of technology or source code subject to the EAR to a foreign national in the United States. Part 734.2(b)(2)(ii).

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

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

- Tours of laboratories - Foreign national employees involved in certain research, development, and manufacturing activities - Foreign students or scholars conducting research - Hosting of foreign scientist

“Deemed Export” Concerns

The deemed export program, in place since 1994, remains an important mechanism to prevent the diversion of sensitive dual use technologies to countries and end users of concern.

The deemed export program addresses two concerns:

- The vital role of foreign nationals in U.S. industry and academia, contributing to the strength of our industrial base and our high-technology advantage, and ultimately our national security;

- Foreign countries seek to illegally acquire controlled U.S. technology that could be diverted to the development of weapons programs.

The Threat

• Dangers of illegal technology transfers are very real:

‑ WMD Proliferation

‑ Weapon Design/Manufacture

‑ Industrial Espionage

• US economy damaged by illegal technology transfers

Published

Information arising or resulting from

fundamental research

Educational

Patents

Not on CCLProd

and

Dev

Subject Subject to Licensing to Licensing **

Dual Use TechnologyDual Use Technology

“Use”

Not controlledNot controlled

What Technologies are Controlled Today?

3 technology types:3 technology types:

““Use”Use”

““Production”Production”

““Development”Development”

ControlledControlled

* With limited exceptions, EAR 99 technology is not subject to deemed export licensing

The Universe of Dual Use Technology

3B001

3D001

3E001

Semiconductor Manufacturing Equipment (SME)

SME SoftwareSoftware

SME Technology

Designed for epitaxial growth capable of producing a silicon layer, thickness uniform to less than +/- 2.5%, across a distance of 200mm or more

Production or development technology is controlled

Deemed Export ECCNs

Production or development Production or development software is controlledsoftware is controlled

The deemed export rule applies to

technology and software source code

The deemed export rule applies to

technology and software source code

7B001

7D001

7E001/2/3/4

Test, calibration or alignment equipment specially designed for:

Equipment SoftwareSoftware

Technology

-Linear accelerometers used in certain inertial nav systems

-Certain gyros and angular or rotational accelerometers

-Certain inertial nav systems

-Certain altimeters

Equipment development or production technology

Repair, refurbishing, or overhaul technology

Deemed Export ECCNs

Development or Development or production softwareproduction software

The deemed export rule applies to

technology and software source code

The deemed export rule applies to

technology and software source code

Recent Debate Over Deemed Export Policy

2004: Commerce Office of Inspector General (OIG) Report

2005-2006: BIS published three deemed export related Federal Register Notices:• Advanced Notice of Proposed Rulemaking

(70FR15607)• Establishment of Advisory Committee and

Clarification of Deemed Export-Related Regulatory Requirements (71FR29301 of 05/22/06)

• Withdrawal of the Deemed Export Advanced Notice of Proposed Rulemaking (71FR30840 of 05/31/06)

2006-2007: Deemed Export Advisory Committee deliberations

December 20, 2007: DEAC releases report. Present day: BIS is reviewing ways to implement some

of the DEAC’s recommendations.

Key Policy Issues

Citizenship of foreign nationals subject to the Deemed Export Rule and Country of Birth

Fundamental Research Definition of “use” technology Deemed Export Advisory Committee

Report of December 20, 2007

U.S. Citizens, Green Card Holders & Protected Immigrants

Published

Educational Information

Patents

Fundamental Research

EAR 99

License Exceptions

License

Sequence of Analysis

Foreign Nationals Not Subject to the Deemed Export Rule

Any foreign national is subject to the deemed export rule except:• A foreign national with U.S. citizenship;• A foreign national with 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.

Reaffirmation of Foreign National Licensing Policy

Naturalized U.S. citizens, U.S. Legal Permanent Residents and U.S. Asylees and Refugees are protected individuals and are not subject to the deemed export rule.

Deemed export licensing policy for foreign nationals that are not protected individuals (i.e., third country nationals) is based on recently established legal permanent residence or citizenship.

• For example: A foreign national born in Iran that has established citizenship or permanent residency in Canada would be treated for licensing purposes as a Canadian.

If an exporter is unable to determine a foreign national’s country of origin for deemed export licensing, the exporter should consult with BIS.

For deemed reexports to a foreign national of another country, licensing is also based on the foreign national’s recently established permanent residency or citizenship.

Country of Origin(Permanent Residency)

Release of controlled technology to a foreign national of one country, say India, who has obtained permanent residency in another, say the U.K., is treated as if the technology transfer were being made to the U.K. and licensing requirements would be the same as for a British national in the U.K.

If the former Indian national becomes a British citizen, transfers of technology would be viewed as transfers to the U.K.

If an Indian foreign national becomes a citizen of the U.K. but retains Indian citizenship, the most recent citizenship is with the U.K. and releases of technology would be viewed as releases to the U.K.

As a general principle, a foreign national’s most recently obtained citizenship governs the licensing requirement.

Country of Origin(Dual Citizenship)

U.S. Citizens, Green Card Holders & Protected Immigrants

Published

Educational Information

Patents

Fundamental Research

EAR 99

License Exceptions

License

Sequence of Analysis

Scope of 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.” (EAR Part 734.8)

"While the product of the fundamental research is not subject to the EAR because the results of that research are intended for publication and dissemination within the scientific community, authorization may be required if during the conduct of the research controlled technology is released to a foreign national.“(71FR30840 of 05/31/06)

Scope of Fundamental Research

Fundamental research technology is not subject to the EAR because:• the technology that rises during or results from the research

is normally made public; and, • the technology necessary to conduct the research is

normally obtained from public or published sources.

If preexisting technology necessary to conduct the research is export controlled; or, if a researcher makes a decision to control the technology that results from the research, then, deemed export licensing requirements must be considered.

Universe of Research

Publicly available technologies

Preexisting Export Controlled Technologies (Subject to the EAR)

INPUT OUTPUT

x

x

x x

x

x

xx

x

x

xx

x

xx

x

xx

x

Results of research published: (e.g., Fundamental Research)

(Not Subject to the EAR)(Not Subject to the EAR)

x

xx

xx

Results of research withheld from publication (Subject to the EAR)

Clarification of “Use” Technology

Mere use of equipment is not a deemed export. Deemed exports occur only if technology subject to the EAR is transferred.

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

• All six attributes of the definition must be present in order to qualify as “use” technology.

• Otherwise the technology is likely EAR99.

This issue was the source of substantial controversy in 2004. Since BIS affirmed the conjunctive definition, this issue has subsided in importance.

Technology Subject to the EAR

General Technology Note • Supplement 1 to EAR Part 774

• The term “technologytechnology” as used in the EAR refers to specific information “required” for the “developmentdevelopment,” “productionproduction,” or “useuse” of specific product (e.g. computer, fermenter, machine tool, etc.).

• “Required” technology refers only to that portion of technology which is peculiarly responsible for achieving or exceeding controlled performance levels, characteristics or functions.

U.S. Citizens, Green Card Holders & Protected Immigrants

Published

Educational Information

Patents

Fundamental Research

EAR 99

License Exceptions

License

Sequence of Analysis

Available License Exceptions for Deemed Exports

• CIV: Civil End Use (EAR §740.5)

Applies to deemed exports for 3E002 technology.

Requires Foreign National Review (FNR)

• TSR: Technology and Software Under Restriction: (EAR §740.6)

Applies to technology and software under national security only for country group “B” nationals.

Requires Letter of Assurance

• APP: Applied Peak Performance (EAR §740.7)

Applies to deemed exports for 4D001/4E001 software and technology. (FNR Required)

U.S. Citizens, Green Card Holders & Protected Immigrants

Published

Educational Information

Patents

Fundamental Research

EAR 99

License Exceptions

License

Sequence of Analysis

Is a License Required?Step 1:

Determine the technologies to be released. It is critical to classify the technology. • Is the technology publicly available? • Is the technology EAR99? • Is the technology described in an entry

on the Commerce Control List? • If so, does a License Exception apply?

Is a License Required?Step 2:

Determine the home country of the foreign national.

Technology and home country of the foreign national determine licensing requirements.

The Deemed Export Application

Same as other technology exports plus• Detailed Letter of Explanation• Comprehensive Bio/Resume• Complete job description• Safeguards to restrict access to that

approved (Technology Control Plan)

Deemed Export Evaluation Factors Personal background, including visa status Technology and purpose of the release Applicant’s Technology Control Plan (TCP) Projected outcome of employment (becoming

U.S. citizen) Permanent employee Applications are easier to approve if they

include details such as:• Any strong ties to the U.S. (e.g., family here)• No ties to home country (no bank account, immediate

family, etc.)• Any special benefits or expertise the foreign national

brings to the applicant (i.e., why the foreign national brings more to the company than he or she will take away)

Letter of Explanation Identities of all parties to the transaction

Exact project location (where the technology or software will be used)

Type of technology and scope

Availability abroad of comparable foreign technology or software

Form in which the technology will be released and the uses for which the technology will be employed.

Applicant’s internal technology control plan

Foreign National’s Resumé All educational institutions attended beyond high

school, with street addresses and degrees and/or certificates received.

All positions held, with employers’ names and street addresses, and brief description of work done.

All time from high school graduation should be accounted for and presented in month/year format, with no gaps greater than 30 consecutive days.

Brief abstracts of all scientific and technical papers published, and presentations at scientific and technical conferences.

Helpful Information Applications are easier to approve if

they include details such as:• Any strong ties to the U.S. (e.g., family here)• No ties to home country (no bank account,

immediate family, etc.)• Any special benefits or expertise the foreign

national brings to the applicant (i.e., why the foreign national brings more to the company than he or she will take away)

Technology Control Plan (TCP)

• TCPs are a standard condition found in deemed export and technology exports licenses

• A TCP should contain the following essential elements:• Corporate commitment to export compliance• Physical security plan• Information security plan• Personnel screening procedures• Training and awareness program• Self evaluation program

• TCPs are a good practice for all holders of export controlled technology

Process Improvements

The following process improvements have been in place since January 2004• Deemed export license validity aligned

with visa • Six month extension provided for

licenses being renewed• Twenty day turnaround on upgrade

license applications Details on the BIS Website

The Path Ahead

Address DEAC recommendations Ongoing Efforts

• Creation of Emerging Technology and Research Advisory Committee

• Intracompany License Exception Proposal

• CCL Review• Expanded deemed export outreach• Notice of Inquiry regarding foreign

national country of affiliation

Deemed Export Contacts

Robert JusteSenior Electrical EngineerPh: 202-482-8245E-mail: rjuste@bis.doc.gov

Kurt FranzSenior Export Policy AnalystPh: 202-482-2278E-mail: kfranz@bis.doc.gov

Alexander LopesDirector, Deemed Exports andElectronics DivisionPh: 202-482- 4875E-mail: alopes@bis.doc.gov

Ilona ShtromSenior Export Policy AnalystPh: 202-482-3235E-mail: lshtrom@bis.doc.gov