Deemed Exports and University Research

1

• Deemed Exports and University Research
• Alex Lopes
• Director, Deemed Exports and Electronics Division
• Office of National Security and Technology
  Transfer Controls
• Bureau of Industry and Security
• U.S. Department of Commerce
• May 23, 2007

2
Agenda

• Why are we here?
• Overview of technologies subject to Department of
  Commerce licensing
• What are deemed exports?
• Deemed export trends
• Key policy issues
• Licensing process
• Deemed Export Advisory Committee (DEAC)

3
Why Are We Here?

• Raise deemed export level of awareness
• Insure regulatory compliance
• Provide a forum to engage and collaborate with
  public and private sectors
• Development and implementation of sound deemed
  export licensing policies

4
Overview of Technology Licensed by the Department
of Commerce

• Must determine whether the technology is either
  Subject to the EAR, or, NOT Subject to the
  EAR
• In an academic setting this is primarily
  dependent on
• Licensing jurisdiction
• Whether or not the technology is publicly
  available

5
Licensing Jurisdiction

• The scope of the Department of Commerce licensing
  authority is defined in the Export Administration
  Regulations (15 CFR part 700)
• Technology under the export licensing
  jurisdiction of another agency is NOT subject to
  the EAR
• State Department (22 CFR part 121)
• Treasury Department, OFAC (31 CFR chapter V)
• Energy Department (10 CFR part 810)
• NRC (10 CFR part 110)
• Patent Trademark Office (37 CFR part 5)

6
Public Availability

• Published information and software is NOT
  subject to the EAR

7
Publicly Available Software

• Not subject to the EAR, except encryption 5D002
• General distribution
• No restrictions to anybody
• No time restraints, e.g., time bombs
• Accessible
• Free or just cost of reproduction/distribution

8
Publicly Available Information

• Technologies which are "publicly available do
  not require a license. These include
• Technology and software (other than software and
  technology controlled as encryption items) that
  are already published or will be published
• Technology which arises during or as a result of
  fundamental research
• Technology which is educational or
• Technology included in certain patent
  applications.

9
Published Information and Software - Section 734.7

• Publication in periodicals, books, print,
  electronic or other media available for general
  distribution
• Readily available at libraries
• Patents and open (published) patent applications
• Released at open conference, meeting, seminar,
  trade show or other open gathering

10
The release of information at an open conference
is not subject to the EAR.
Example Conferences
A conference is open if all technically
qualified members of the public are eligible to
attend and attendees are permitted to take notes.
Technologies discussed in open seminars and
conferences are considered to be publicly
available and are outside the scope of the EAR.
11
Internet Transfers of Technology

• Transfers of technology or software on the
  Internet are treated like transfers made through
  other methods of distribution
• Publication on the Internet is treated like other
  methods of publication

12
Publishing on the Internet

• Unrestricted software is publicly available and
  not subject to the EAR if given to all persons in
  an interested community at no more than the cost
  of reproduction and distribution.
• The most common way to make technology or
  software available to anyone on the Internet is
  to put the document on a World Wide Web page
  where it may be downloaded by anyone.

13
Fundamental Research Section 734.8

• Remember
• 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.

14
Fundamental Research Prepublication Review?

• University based
• Federal agencies or Federally Funded Research and
  Development Center (FFRDC)
• Corporate research

15
Educational Information Section 734.9

• Released by instruction in catalog courses and
  associated teaching laboratories of academic
  institutions

16
Technology and Software Classification

• Review Commerce Control List (CCL)
• Identify Export Control Classification Number
  (ECCN)
• In most cases tied directly to hardware
  development, production or use
• In small number of cases based on specific
  technical parameters
• The General Technology Note

17
Technology and Software 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
3E001
Product Groups D and E
SME Technology
Production or development technology is controlled
18
Technology and Software 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
Product Groups D and E
Technology
Equipment development or production technology
Repair, refurbishing, or overhaul technology
19
EAR99

• Items subject to the EAR that are not
  specifically described on the Commerce Control
  List.

In most cases, the export of an EAR99 item can be
completed using the license authorization
NLR No License Required
20
Classification Tips

• Start with the most stringent control in the
  category and work toward the least restrictive
  control
• Identify associated software or technology
  controls
• Commerce can provide classifications or
  verifications given enough information about the
  technology or software

21
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
22
Scope of Technology Controls

• General Technology Note Supplement No. 2 to part
  774
• Development
• Production
• Use
• Required

23
"Development"

• "Development" is related to all stages prior to
  serial production, such as
• design, design research, design analyses, design
  concepts,
• assembly and testing of prototypes, pilot
  production schemes,
• design data, process of transforming design data
  into a product, configuration design, integration
  design, layouts

24
"Production"

• Means all production stages, such as
• product engineering,
• manufacture,
• integration,
• assembly (mounting),
• inspection,
• testing,
• quality assurance.

25
"Use"

• All of these are required in order to qualify as
  controlled use technology.
• Operation,
• installation (including on-site installation),
• maintenance (checking),
• repair,
• overhaul, and,
• refurbishing.

26
"Required"

• As applied to "technology" or "software", refers
  to only that portion of "technology" or
  "software" which is peculiarly responsible for
  achieving or extending the controlled performance
  levels, characteristics or functions.

27
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

28
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.

29
The Threat
Dangers of illegal technology transfers are
very real - WMD Proliferation
- Weapon Design/Manufacture -
Industrial Espionage US economy damaged by
illegal technology transfers
30
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
31
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
32
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
33
Deemed Export FY2006 Summary

• In FY2006, the Bureau approved 85, returned
  without action approximately 14, and denied less
  than 1 of the total of 865 deemed export license
  applications
• Almost 60 of the deemed export licenses
  processed are for PRC foreign nationals
• Followed in descending order by foreign nationals
  from India (13), Iran (7), Russia and Germany
  (2) and UK (1)
• Most deemed export licenses are processed in 40
  days

34
Annual Deemed Export Licensing Trends
Projected
To Date

• Most Common Deemed Exports
• Semiconductor Electronics - Category 3
• High Performance Computers - Category 4
• Telecommunications - Category 5

35
Recent Debate Over Deemed Export Policy

• 2004 Commerce Office of Inspector General (OIG)
  Report
• Highly critical of the Deemed Export Program
• 2005 BIS published two deemed export related
  Federal Register Notices
• 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

36
Key Policy Issues

• Citizenship of foreign nationals subject to the
  Deemed Export Rule
• Fundamental Research
• Definition of use technology

37
Sequence of Analysis
U.S. Citizens/Green Card/Protected Immigrants
Published
Educational Information
Patents
Fundamental Research (FR)
EAR 99
License Exceptions
License
38
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.

39
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.

40
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.
41
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.
42
Sequence of Analysis
U.S. Citizens/Green Card/Protected Immigrants
Published
Educational Information
Patents
Fundamental Research (FR)
EAR 99
License Exceptions
License
43
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

44
Scope of Fundamental Research Is Unchanged

• 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

45
Scope of Fundamental Research Is Unchanged

• 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.

46
Government Sponsored Research Under the EAR

• Under the EAR, prepublication reviews or short
  delays to publication so proprietary information
  can be scrubbed is permitted
• For government-sponsored research, access and
  dissemination controls normally do not trigger a
  license as long as the researching entity follows
  national security controls set forth in contract

47
Collaborative Research Relationships

• If a foreign national develops, produces or uses
  items, equipment, software or technology
  overseas, and sends any one of them to the U.S.,
  this item then becomes U.S. origin
• If these technologies or commodities are
  controlled, a license may be required for export,
  even if it is exported back to the same exact
  institution for the same purpose

48
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
49
Clarification of Use Technology

• The use of export controlled equipment is not a
  deemed export. Deemed exports occur only if
  controlled technology 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 controlled use
  technology.
• Otherwise the technology is likely EAR99.

50
EAR Controlled Technology

• 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.

51
Commodity Classifying Technology Subject to the
EAR

• Thumb rule
• (If the technology is under DOC jurisdiction and
  not publicly available)
• Does the technology enable replication of the
  export controlled item (production technology)?
• Does the technology enable design improvement of
  the export controlled item (development
  technology)?
• Is the item being used to produce or design
  weapons of mass destruction, military hardware,
  export controlled dual use items (controlled use
  technology)?
• If the answer to all of the above questions is
  no The item is likely EAR 99

52
Sequence of Analysis
U.S. Citizens/Green Card/Protected Immigrants
Published
Educational Information
Patents
Fundamental Research (FR)
EAR 99
License Exceptions
License
53
What is a License Exception?

• Authorization to export or reexport without a
  license
• Each exception has a three letter symbol
• Part 740 of EAR used for export clearance
  purposes
• Some require notification, review, or supporting
  documentation prior to use

54
General Restrictions 740.2

• Authorization suspended or revoked
• Subject to one of the 10 General Prohibitions
• ECCN 5A980
• Crime control and detection items
• Most items controlled for MT reasons
• Certain space qualified items
• ECCNs 2A983, 2D983, 2E983
• The QRS11 sensor found in ECCN 7A994

55
Country Groups Supplement 1 to Part 740
Group A Regime Members Group B Less
Restricted Group D Countries of Concern
Group E Terrorist Supporting
56
Available License Exceptions for Deemed Exports

• CIV Civil End Use (EAR 740.5)
• Applies to deemed exports for 3E001/3E002
  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)

57
Sequence of Analysis
U.S. Citizens/Green Card/Protected Immigrants
Published
Educational Information
Patents
Fundamental Research (FR)
EAR 99
License Exceptions
License
58
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?

59
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.

60
The Deemed Export Application

• Same as other technical data exports plus
• Detailed Letter of Explanation
• Comprehensive Bio/Resume
• Complete job description
• Safeguards to restrict access to that approved
  (Technology Control Plan)

61
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)

62
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

63
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.

64
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)

65
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

66
BIS Deemed Export Security Evaluation

• Deemed export licenses receive a thorough and
  security intensive review.

• Security Review
• State Department
• Export Enforcement
• Federal Bureau of Investigation
• WINPAC

Consular Affairs Embargo Countries
Pre-license Checks (if required)
Law enforcement
Intelligence check
67
Review and Escalation Process
Company Screening Process
Confidentiality Review Agreement
CIS Work Visa
BIS Deemed Export Division
BIS OEE
DOD
DOE
FBI
STATE
WINPAC
Advisory Committee on Export Policy (ACEP) (If
Necessary)
Export Administration Review Board (EARB) (If
Necessary)
Operating Committee (OC) (If Necessary)
68
A Final Deemed Export Topic to Consider

• Exporters must distinguish between the following
  to insure the correct licensing authorization
• Deemed export of technology
• Deemed reexport of technology
• Technology export and,
• Technology reexport.
• Exporters in general are creating unnecessary
  licensing burdens

69
Deemed Export Advisory Committee

• Comprehensive policy review
• Required by law to meet quarterly
• Meetings open to the public
• The final report is expected to be delivered to
  the Secretary of Commerce in late 2007

70
Deemed Export Advisory Committee

• DEAC Members
• Norman Augustine, Retired Chairman CEO,
  Lockheed Martin Corporation
• Robert Gates, PhD, President of Texas AM
  University
• Albert Carnesale, PhD, Former Chancellor of the
  University of California at Los Angeles
• Ruth David, PhD, President CEO, Analytic
  Services, Inc.
• The Honorable John Engler, President, National
  Association of Manufacturers
• Anthony Frank, PhD, Provost and Senior Vice
  President, Colorado State University
• General John A. Gordon, Former Deputy Director,
  Central Intelligence Agency
• Sean O'Keefe, Chancellor, Louisiana State
  University
• Eva Pell, PhD, Senior Vice President and Dean of
  the Graduate School, Penn State University
• Michael Splinter, CEO, Applied Materials
• James Siedow, PhD, Vice Provost for Research and
  Professor of Biology, Duke University
• William A. Wulf, PhD, President, National Academy
  of Engineering and Professor of Computer Science
  and University Professor, University of Virginia.
• Chairperson Resigned to become Secretary
  of Defense

71
http//www.bis.doc.gov

• Licensing
• Deemed Exports
• Process Improvements
• Licensing Guidance
• Frequently Asked Questions
• Q As Clarifying Deemed Export Licensing Policy
• Advisory Opinions

72
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
Kurt Franz Senior Export Policy Analyst Ph
202-482-2278 E-mail kfranz_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