Deemed Exports

1

• Deemed Exports
• Texas AM
• April 10, 2008
• Alex Lopes
• Director, Deemed Exports and
• Electronics Division

2
Deemed Export Agenda

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

3
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

4
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.

5
The Threat
Dangers of illegal technology transfers are
very real - WMD Proliferation
- Weapon Design/Manufacture -
Industrial Espionage US economy damaged by
illegal technology transfers
6
What Technologies are Controlled Today?
The Universe of Dual Use Technology
Controlled
3 technology types Use Production Developmen
t
With limited exceptions, EAR 99 technology is
not subject to deemed export licensing
7
Deemed Export ECCNs
3B001
Semiconductor Manufacturing Equipment (SME)
Production or development software is controlled
Designed for epitaxial growth capable of
producing a silicon layer, thickness uniform to
less than /- 2.5, across a distance of 200mm
or more
3D001
SME Software
The deemed export rule applies to technology and
software source code
3E001
SME Technology
Production or development technology is controlled
8
Deemed Export ECCNs
7B001
Test, calibration or alignment equipment
specially designed for
Development or production software
-Linear accelerometers used in certain inertial
nav systems -Certain gyros and angular or
rotational accelerometers -Certain inertial nav
systems -Certain altimeters
7D001
Equipment Software
7E001/2/3/4
The deemed export rule applies to technology and
software source code
Technology
Equipment development or production technology
Repair, refurbishing, or overhaul technology
9
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 DEACs recommendations.

10
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

11
Sequence of Analysis
U.S. Citizens, Green Card Holders Protected
Immigrants
Published
Educational Information
Patents
Fundamental Research
EAR 99
License Exceptions
License
12
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.

13
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
  nationals 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 nationals recently established permanent
  residency or citizenship.

14
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.
15
Country of Origin (Dual Citizenship)
As a general principle, a foreign nationals most
recently obtained citizenship governs the
licensing requirement.
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.
16
Sequence of Analysis
U.S. Citizens, Green Card Holders Protected
Immigrants
Published
Educational Information
Patents
Fundamental Research
EAR 99
License Exceptions
License
17
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)

18
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.

19
Universe of Research
Results of research published (e.g., Fundamental
Research)
Publicly available technologies
x
x
x
x
(Not Subject to the EAR)
x
x
(Not Subject to the EAR)
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Preexisting Export Controlled Technologies
(Subject to the EAR)
Results of research withheld from publication
(Subject to the EAR)
INPUT
OUTPUT
20
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.

21
Technology Subject to the EAR

• General Technology Note
• Supplement 1 to EAR Part 774
• The term technology as used in the EAR refers
  to specific information required for the
  development, production, or use 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.

22
Sequence of Analysis
U.S. Citizens, Green Card Holders Protected
Immigrants
Published
Educational Information
Patents
Fundamental Research
EAR 99
License Exceptions
License
23
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)

24
Sequence of Analysis
U.S. Citizens, Green Card Holders Protected
Immigrants
Published
Educational Information
Patents
Fundamental Research
EAR 99
License Exceptions
License
25
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?

26
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.

27
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)

28
Deemed Export Evaluation Factors

• Personal background, including visa status
• Technology and purpose of the release
• Applicants 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)

29
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.
• Applicants internal technology control plan

30
Foreign Nationals 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.

31
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)

32
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

33
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

34
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

35
Deemed Export Contacts
Alexander Lopes Director, Deemed Exports
and Electronics Division Ph 202-482-
4875 E-mail alopes_at_bis.doc.gov
Ilona Shtrom Senior Export Policy Analyst Ph
202-482-3235 E-mail lshtrom_at_bis.doc.gov
Robert Juste Senior Electrical Engineer Ph
202-482-8245 E-mail rjuste_at_bis.doc.gov
Kurt Franz Senior Export Policy Analyst Ph
202-482-2278 E-mail kfranz_at_bis.doc.gov