Department of Commerce Bureau of Industry and Security

1
Department of CommerceBureau of Industry and
Security
U.S. Export Controls NOAA Deemed Exports
Training July 26-27, 2005
2
Overview of Activities

• Purpose of the next 2-days
• Provide NOAA with the foundational tools to
  implement a deemed export program
• Provide BIS resources in support of OIG
  recommendations
• Objective of the next 2-days
• Review the essentials of the Export
  Administration Regulations (EAR)
• Prepare each of you with the tools you need to
  participate in a deemed export compliance program
  at your location

3

• Export Controls Overview

4
Mission Statement

• Advance U.S. national security, foreign policy
  and economic interests
• Regulate exports
• Enforce compliance
• Assist key transit nations
• Monitor the U.S. defense industrial base

5
Other Regulatory Agencies(Supplement 3 to Part
730)

• U.S. Department of State - Directorate of Defense
  Trade Controls
• U.S. Department of Justice - Drug Enforcement
  Administration
• U.S. Department of Interior - Fish Wildlife
  Service
• U.S. Department of Energy
• U.S. Nuclear Regulatory Commission
• U.S. Department of Treasury - Office of Foreign
  Assets Control
• U.S. Department of Commerce - Office of Patent
  Trademarks
• U.S. Department of Agriculture
• U.S. Department of Health and Human Services -
  Food Drug Administration

6
Authority for Export Controls

• Export Administration Act (EAA) of 1979, as
  amended
• International Emergency Economic Powers Act, as
  amended

7
Export Control Regimes

• Wassenaar Arrangement
• Supplement 1 to Part 743
• Missile Technology Control Regime (MTCR)
• Supplement 1 to Part 740 (A2)
• Australia Group (AG)
• Supplement 1 to Part 740 (A3)
• Nuclear Suppliers Group (NSG)
• Supplement 1 to Part 740 (A4)

8
Export Administration Regulations (EAR)

• Implement the Export Administration Act
• Apply to dual-use items

Broad jurisdiction but narrow controls (license
requirements)
9
Important EAR Terms

• Subject to the EAR
• Item
• Export
• Re-export
• Deemed export/release of technology
• Export Control Classification Number (ECCN)

10
Facts in Hand

• What is my item?
• Where is it going?
• Who will receive it?
• What will be the end-use?
• What else does my end-user do?

11

• Deemed Exports

12
Deemed Export Policy Concerns

• Deemed exports are an important part of the
  overall mission of BIS to control exports and
  reexports of sensitive U.S. technology to
  countries of concern.
• The current deemed export rule was established in
  1994 to address national security issues relating
  to the transfer of sensitive technologies to
  certain foreign nationals working on controlled
  technology within the U.S.
• At the same time, foreign nationals play a vital
  role 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.

13
The Existing Deemed Export Program

• Based on these concerns, since 1994 BIS has
  developed an export control program that licenses
  approximately 1,000 foreign nationals annually
  and conducts significant outreach (116 activities
  during FY2004) to the affected communities.
• Industry, academia, and Federal labs are required
  to comply with the existing rules, which have
  been in place for a decade.

14
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

15
Exempted from the RulePart 734.2(b)(2)(ii)

• 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.

16
Is a License Required? Step 1

• Identify equipment that is export controlled
• Determine if technologies associated with this
  equipment is export controlled. 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?

17
Is a License Required? Step 2

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

18
Step 2 (continued)
Home Country (Permanent Residency under review )
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 shipment 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.
19
Step 2 (continued)
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.
20
Remember

• Transfer of technology to a foreign national does
  not automatically mean that a license is
  required.
• The technology to be released to the foreign
  national may be
• Publicly Available
• EAR99
• License Exception eligible.

21
FY 2005 Deemed Export Licensing Data
Most Common Deemed Exports Semiconductor
Electronics - Category 3 Telecommunications -
Category 5 Computer Systems - Category 4
Projected FY2005 based on YTD 5/20/2005 totals
22

• Items Subject to the
• Export Administration Regulations (EAR)

23
What is Subject to the EAR?

• Items in the U.S.
• Items located outside of the U.S.
• Activities of U.S. Persons Foreign Nationals

24
Subject to the EARPart 734.3

• Items in the U.S., except
• Publicly available technology software
  (excluding encryption)
• Items subject to the exclusive jurisdiction of
  another Federal Department or Agency
• Publications that are artistic or non-technical
  in nature

25
Subject to the EARPart 734.3

• Items located outside the U.S.
• U.S. Origin items wherever located
• Certain foreign-made items, if
• The foreign-product item is the direct product of
  U.S. technology or software
• The value of the U.S. content exceeds the de
  minimis percentage
  
• Supplement 2 to part 734 - de minimis calculation
  

26
Subject to the EAR

• U.S. Persons Deemed Export and Reexports
• Certain activities of U.S. persons (section
  744.6)
• Deemed exports and reexports of technology or
  source code released to foreign nationals
  (section 734.2(b)(4) (5))

27

• Deemed Export Issue

28
Sequence of Analysis
U.S. Citizens/Green Card/Protected Immigrants
Publicly Available
Educational Information
Patents
Fundamental Research (FR)
EAR 99
License Exceptions
License
29
Protected Individuals

• 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.

30
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
• 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

31
Classify the Technology

• Most technology is not controlled (Publicly
  available or EAR99)
• Sensitive technologies are controlled, based on
  specific parameters of Export Control
  Classification Numbers (ECCNs) on the Commerce
  Control List.
• Controlled technologies may require licensing
  based on the foreign nationals country of origin.

32
Identify and Classify the Technology

• Ten Categories (part 738.2(a))
• 0-Nuclear
• 1-Materials, Chemical, Microorganisms and
  Toxins
• 2-Materials Processing (e.g. machine tools)
• 3-Electronics
• 4-Computers
• 5-Telecommunications and Information Security
• 6-Lasers and Sensors
• 7-Navigation and Avionics
• 8-Marine
• 9-Propulsion Systems, Space Vehicles and Related
  Equipment (e.g. aerospace)

33
Classify the Technology

• Five Groups (part 738.2(b))
• A - Equipment, Assemblies and Components
• B - Test, Inspection and Production Equipment
• C - Materials
• D - Software
• E - Technology

34
3A292
Deemed Export ECCNs
Digital Oscilloscope
Analog-digital conversion, greater than 1
giga-sample per second, 8 bits or greater
resolution, stores 256 or more samples
3D292
Oscilloscope Software
The deemed export rule primarily affects
technology and software.
3E292
Oscilloscope Technology
Production, development or use technology is
controlled
35
Telemetry Equipment
Deemed Export ECCNs
5A101
Designed or modified for UAVs or rocket systems
5D101
Telemetry Software
The deemed export rule primarily affects
technology and software.
5E101
Telemetry Technology
Production, development or use technology is
controlled
36
Semiconductor Manufacturing Equipment (SME)
3B001
Deemed Export ECCNs
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 primarily affects
technology and software.
3E001
SME Technology
Production or development technology is controlled
37
Acoustics
6A001
Deemed Export ECCNs
Object detection systems having any of the
following 1) Transmit frequency below 10kHz 2)
SPL greater than 224 dB for equipment that
operate 10kHz-24kHz inclusive 3) SPL greater
than 235 dB for equipment that operate between
24kHz and 30 kHz 4) Form beams less than 1
degree on any axis operating less than 100kHz 5)
Unambiguous display range exceeding 5120m or, 6)
Withstand pressure at depths exceeding 1000m.
6D001
Acoustics Software
The deemed export rule primarily affects
technology and software.
6E001/2
Acoustics Technology
Development and production technology is
controlled
38
8A992
Underwater Equipment
Deemed Export ECCNs
Life jackets, inflation cartridges, compasses,
wetsuits, masks, fins, weight belts, and dive
computers
8D992
Underwater Equipment Software
The deemed export rule primarily affects
technology and software.
8E992
Underwater Equipment Technology
Development, production, and use technology is
controlled
39
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.
• 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.).
• Refers only to that portion of technology which
  is peculiarly responsible for achieving or
  exceeding controlled performance levels,
  characteristics or functions.

40
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.

41
Fundamental Research

• The fundamental research exemption 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.

42
Fundamental Research
World of Research
Uncontrolled Technologies
Information resulting from fundamental Research
x
x
x
x
x
x
x
x
x
x
x
Controlled Technologies
x
x
x
x
x
x
x
x
INPUTS
OUTPUTS
43
Establishing a Culture of Export Compliance

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

44

• How to Classify

45
How is My Item Classified for Export Control
Purposes?

• The Commerce Control List
• Export Control Classification Numbers
• Reasons for Control
• The Country Chart
• Classifying Items
• Technology Software Controls

46
Structure of the Commerce Control List

• Supplement 1 to Part 774
• Alphabetical Index
• 10 Categories
• Entries (Export Control Classification Number)
• General Technology and Software Notes-Supplement
  No. 2

47
Export Control Classification Number ECCN

• What items are controlled?
• Why BIS controls the product?
• Which destinations require a license?
• Which license exception(s) apply?

48
STRUCTURE OF THE ECCN

• 3 A 001
• 3 CATEGORY
• A PRODUCT GROUP
• 001 TYPE OF CONTROL

49
Category

• 0 Miscellaneous / Nuclear
• 1 Materials
• 2 Materials Processing
• 3 Electronics
• 4 Computers

50
Category

• 5 Telecommunications (Pt. 1) and Information
  Security (Pt. 2)
• 6 Sensors/Lasers
• 7 Navigation Avionics
• 8 Marine Technology
• 9 Propulsion Systems, Space Vehicles Related
  Equipment

51
Product Group

• A - Systems, Equipment, Components
• B - Test, Inspection Production Equipment
• C - Materials
• D - Software
• E - Technology

52
Numbering System

• 001-099 National Security
• 100-199 Missile Technology
• 200-299 Nuclear Nonproliferation
• 300-399 Chemical Biological
• 900-999 Foreign Policy
• 980-989 Short Supply/Crime Control
• 990-999 Anti-Terrorism/United Nations

53
Reasons for Control

• AT Anti-Terrorism
• CB Chemical Biological Weapons
• CC Crime Control
• EI Encryption Items
• FC Firearms Convention
• MT Missile Technology
• NP Nuclear Nonproliferation

• NS National Security
• RS Regional Stability
• SI Significant Items
• SS Short Supply
• UN United Nations
• XP High Performance Computers

54
Review

• The structure of the ECCN consists of 3 main
  parts what are they?

Name three reasons for control.
55
How to Read an ECCN Entry

• Heading - ECCN and Description
• License Requirements
• Reasons For Control
• License Exceptions (List-Based)
• List of Items Controlled
• Units
• Related Controls
• Related Definitions
• Items

56
Country Chart StructureSupplement 1 to Part 738
57
Is an Export License Required?

• X in the box
• License
• License Exception
• No X in the box
• NLR - No License Required
• Must check General Prohibitions 4 - 10

58
EAR99

• If an item subject to the EAR does not fall
  within a specific ECCN, it is designated as
  EAR99.

59
No License Required NLR

• Items not listed on the CCL but falling under the
  scope of the EAR and no General Prohibitions
  apply to the export.
• Items listed on the CCL not requiring a license
  to intended destination and no General
  Prohibitions apply to the export.

60
Review

• Does an x in the box on the Commerce Country
  Chart mean that there is a license requirement?
• If your item is EAR99, then you may export this
  item using the license authorization symbol NLR,
  true or false?

61
The Commerce Control List and Country Chart
How is an Item Classified for Export Control
Purposes?
62
How to Classify Your Item

• The Manufacturer
• Your Company Engineer
• Official Request to BIS

63
An Approach to Classifying Items

• Function/Characteristic
• Index Comparison
• Written Request

64
How to Request a Classification Form BIS-748P
or SNAP

• Manufacturer
• Model / Part Number
• Applications
• Specifications
• Pictorial Illustration
• e.g. Sales Brochures

65
Improper Classification Results

• Delays in Exporting
• Violation (s) of the EAR

66
Technology and Software

• Scope
• Publicly Available
• Classification

67
General Technology Note Supplement 2 to Part 774

• The export of technology that is required for
  the development, production or use of items on
  the CCL is controlled according to the provisions
  in each category.

68
Technology and Software Terms

• Development
• Production
• Use

69
Technology and Software Exports and Re-exports

• Includes direct transfers
• consultations, visual inspection
• Includes transfers regardless of the media
• floppy disk, blueprints, hardcopy...
• Includes electronic transfers
• via the INTERNET, electronic mail...

70

• License Exceptions

71
Steps

• Determine ECCN
• Check Country Chart
• Is there an X in the Box?
• If yes,
• Is a License Exception Available?

72
What is aLicense Exception?

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

73
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

74
Country Groups Supplement 1 to Part 740
Group A Regime Members Group B Less
Restricted Group D Countries of Concern Group
E Terrorist Supporting
75
List Based License Exceptions

• Availability Based on ECCN
• Shipments to B Countries (GBS)
• Civil End Users (CIV)
• Technology and Software Restricted (TSR)

76
CIV - Civil End-Users 740.5

• Country Group D1, except North Korea
• Items controlled for national security only
• Items that require a license for NS only
• Civil end-uses and end-users
• No military or proliferation end-users/uses
• CIV Yes
• Reporting requirements in 743.1

77
TSR - Technology Software Under Restriction
740.6

• Country Group B
• Technology software controlled for national
  security only
• Technology Software that require a license for
  NS only
• TSR Yes
• Prior to use, written assurance required from
  consignee

78

• Deemed Export Licensing Process

79
The Deemed Export Application

• Same as other technical data plus
• Comprehensive Bio
• Complete job description
• Safeguards to restrict access to that approved

80
Deemed Export Evaluation Factors

• Personal background, including visa status
• Technology and purpose of the release
• Applicants Internal Control Program
• Projected outcome of employment
• Permanent employee

81
License Application Form BIS 748P or SNAP

• Block 9 - Special Purpose
• Transfer of controlled technology to foreign
  national pursuant to Section 734.2(b)(2)(ii) of
  the EAR
• Block 23 - Dollar Value
• Usually nominal 1 per foreign national per
  license

82
License Application Form BIS 748P or SNAP

• Block 19 End-User
• Provide evidence of immigration status
• Include U.S. address
• Put home country in Country Box

83
Letter of Explanation

• Identities of all parties to the transaction
• Exact project location (where the technology or
  software will be used)
• Type of technology
• Form in which the technology will be released and
  the uses for which the technology will be
  employed.

84
Letter of Explanation

• Technical scope
• Availability abroad of comparable foreign
  technology or software
• Applicants internal technology control plan

85
Foreign Nationals Résumé

• 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

86
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)

87
Essential Elements of a Technology Control Plan
(TCP)

• Corporate commitment to export compliance
• Physical security plan
• Information security plan
• Personnel screening procedures
• Training and awareness program
• Self evaluation program

88
Parties of Concern

• Denied Persons List
• Known violators of the regulations

• Entity List
• Entities (public and private sector) involved
  with weapons of mass destruction programs

89
Listed Entity Involvement

• Release of controlled technology to an employee
  of a listed entity is treated as a release of
  controlled technology to the listed entity
  itself.

90
Review and Escalation Process
Company Screening Process
Confidentiality Review Agreement
INS Work Visa
BIS Deemed Export Division
BIS OEE
DOD
DOE
FBI
STATE
Advisory Committee on Export Policy (ACEP) (If
Necessary)
Export Administration Review Board (EARB) (If
Necessary)
Operating Committee (OC) (If Necessary)
91
Bureau of Industry and SecurityExport
Administration
Todd Willis Senior Export Policy Analyst Ph
202-482-9163 E-mail twillis_at_bis.doc.gov
Alexander Lopes Director, Deemed Exports
and Electronics Division Ph 202-482-
4875 E-mail alopes_at_bis.doc.gov
Robert Juste Senior Electrical Engineer Ph
202-482-8245 E-mail rjuste_at_bis.doc.gov
Kurt Franz Export Policy Analyst Ph
202-482-2278 E-mail kfranz_at_bis.doc.gov
Darrell Spires Senior Engineer Ph
202-482-1954 E-mail dspires_at_bis.doc.gov
92
BIS Web site

• www.bis.doc.gov
• Licensing
• Deemed Exports
• Process Improvements
• Licensing Guidance (pdf)
• Frequently Asked Questions

93

• EXERCISES