Deemed Export Overview for:

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• Deemed Export Overview for
• The National Council on International
• Trade Development
• Todd Willis
• Senior Export Policy Analyst
• Deemed Exports and Electronic Division
• Bureau of Industry and Security
• U.S. Department of Commerce

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Outline

• Deemed exports
• Issues
• Country of origin based on country of birth
• Export controls in the context of fundamental
  research
• Use technology
• Decision making sequence of analysis
• Overview of Inspector Generals Recommendations
• Next Steps

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Current Debate

• We all agree that deemed export policy is a
  legitimate national security issue the question,
  of course, is on how best to deal with it
• Unfortunately, the discussion over deemed export
  policy has developed into a contentious and
  legalistic debate over the specifics of current
  and future regulations rather than a
  collaborative discussion about policy objectives
  and content
• There are broadly held misperceptions within the
  research community about current and proposed
  deemed export regulations, aggravated by a lack
  of facts and fueled by distortions and
  misunderstanding within the press
• The current debate is couched within zero-sum
  thinking -- security vs. innovation -- rather
  than based on a cooperative approach to achieving
  both that would allow university leaders to get
  out in front of this issue
• The key to success in this area is effective
  collaboration among government, academia, and
  industry to gather facts and develop fact-based
  policy

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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

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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 balances 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.

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Sequence of Analysis
U.S. Citizens/Green Card/Protected Immigrants
Published
Educational Information
Patents
Fundamental Research (FR)
EAR 99
License Exceptions
License
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Foreign Nationals Not Subject to the Deemed
Export Rule

• Any foreign national is subject to the deemed
  export rule except
• 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.

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Third Country Foreign National Licensing Policy

• Under current export licensing policy, a foreign
  nationals recently established citizenship or
  residency is used to determine the licensing
  requirements.
• BIS intends to retain this policy and will not
  adopt the IG recommendation to base a license
  requirement on a foreign nationals country of
  birth.

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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.
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Home Country (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.
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Technology Not Subject to the EAR

• 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
• Fundamental Research (EAR 734.8)
• - Basic and applied research where resulting
  information is ordinarily published and broadly
  shared within scientific community
• 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

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Scope of Fundamental Research

• Confusion exists over the scope of fundamental
  research.
• Some research entities believe fundamental
  research regulatory language provides relief from
  all export licensing consideration.

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Fundamental Research Regulatory Language

• EAR 734.8- information resulting from fundamental
  research is not subject to EAR licensing
  requirements
• 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.
• This definition of fundamental research is echoed
  in NSDD-189, Presidential Policy Directive issued
  by President Reagan in 1985 and still in effect
  today.

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Fundamental Research

• Fundamental research 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.
• If there is preexisting export controlled
  technology required to conduct the research then
  deemed export licensing implications must be
  considered.

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Fundamental Research
World of Research
Uncontrolled Technologies
Information resulting from fundamental Research
x
x
x
x
x
x
x
x
x
x
x
Preexisting Export Controlled Technologies
x
x
x
x
x
x
x
x
INPUT
OUTPUT
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Export Controlled Technology

• The term technology as used in the EAR refers
  to specific information required for the
  development, production, or use of specific
  product
• Required technology refers only to that portion
  of technology which is peculiarly responsible for
  achieving or exceeding controlled performance
  levels, characteristics or functions.
• The use of export controlled equipment is not a
  deemed export.
• Deemed exports occur only if controlled
  technology is transferred.

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Use Technology Licensing Requirement

• There has been much focus on what use
  technology requires export control.
• A deemed export is the transfer of required
  export controlled technology Required use
  technology is rarely transferred during the
  operation of an export controlled item.
• Issue underscores the need to correctly
  commodity classify the controlled technology
  available to a foreign national.

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Inspector Generals Recommendations

• In March 2004, the Department of Commerce
  Inspector General released a report that
• highlighted confusion within the research
  community over the deemed export regulation
• recommended that BIS improve outreach activities
  to the academic community and strengthen its
  overall deemed exports compliance program
• The IG report also made three recommendations for
  strengthening the deemed export regulations
  suggestions that BIS should
• Modify the definition of use technology in the
  EAR to help licensing and enforcement officials
  better implement and enforce deemed export
  controls associated with technology for the use
  of controlled equipment
• Clarify that, notwithstanding the fundamental
  research exemption, the release of controlled
  use technology in the conduct of fundamental
  research may constitute a deemed export,
  thereby requiring a license
• Revise its policy of basing license requirements
  for foreign nationals on most recent country of
  citizenship or permanent residence, and instead
  base licensing on the individuals country of
  birth (USG has decided against adopting this
  recommendation)

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The IG report generated enormous input and
concern from the RD community
Members of Congress - 1

• Primary Concerns
• Infringement on Fundamental Research
• Compliance costs
• Deterrence of foreign students and researchers
• Inconsistent with foreign privacy laws

Foreign Governments .6
Academic Associations - 6.8
Other - 9.6
Companies 7.4
Universities 66.2
Trade Associations Think Tanks 8.4
Total Sources of Feedback 311
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Two deemed export issues raised by the IG remain

• Issue 1
• And versus Or in Definition of Use Should
  the definition of controlled use technology be
  revised to clarify that it covers operation,
  installation, maintenance, repair, overhaul, or
  refurbishing rather than operation,
  installation, maintenance, repair, overhaul, and
  refurbishing?

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Two deemed export issues raised by the IG remain

• Issue 2
• Scope of Fundamental Research
• Should the Commerce Departments current
  position that controlled technology (use,
  development, or production) be subject to the
  deemed export rule if accessed by a foreign
  national while conducting fundamental research be
  revised to exclude this requirement consistent
  with the current interpretation by many in the
  academic community?

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Next Steps Collaboration is the key to finding
the right answers

• Over-communication to understand the issues and
  develop solutions based on a factual
  understanding and evaluation of
• the threat from foreign technology gathering
  programs
• the vulnerability of potential high risk
  technologies present on campus
• the costs of compliance
• Establishment of targeted and effective
  regulations, drawing on the university community
  as an integral part of the regulatory review and
  policy making process
• Outreach to help universities understand the
  regulations and establish sound and
  cost-effective compliance programs
• Open communications channels for sharing
  information and understanding enforcement concerns

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Deemed Export Contacts
Alexander Lopes Director, Deemed Exports
and Electronics Division Ph 202-482-
4875 E-mail alopes_at_bis.doc.gov
Todd Willis Senior Export Policy Analyst Ph
202-482-9163 E-mail twillis_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