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March 28, 2005 

BIS publishes Advance Notice of Proposed Rulemaking on Revision and Clarification of Deemed Export Regulatory Requirements

The Bureau of Industry today published in the Federal Register an advance notice of proposed rulemaking (ANPR) seeking public comments on proposed changes to the regulations governing the issuance of "deemed export" licenses for the transfer of controlled technology to foreign nationals in the U.S. The proposed changes are a direct result of a report issued by the U.S. Department of Commerce's Inspector General (IG) in March 2004 that concluded that existing BIS policies under the Export Administration Regulations (EAR) could enable foreign nationals from countries and entities of concern to access otherwise controlled technology. See Deemed Export Controls May Not Stop the Transfer of Sensitive Technology to Foreign Nationals in the U.S. (Final Inspection Report No. IPE-16176, March 2004).

As a result of the IG's report, BIS is considering the following changes to the EAR:
(1) Definition of "Use" Technology -- The IG stated that confusion existed over the definition and implementation of controls associated with the "use" of equipment by foreign nationals in the United States. Specifically, the IG expressed concern over the definition of use in section 772.1 of the EAR which defines "use" as "Operation, installation (including on-site installation), maintenance (checking), repair, overhaul, and refurbishing." The IG expressed concern about the presence of the word "and" in the definition being interpreted to mean that all of the activities enumerated in the definition must be present in order to constitute "use." In its report the IG suggested that BIS revise the definition of "use" in section 772.1 of the EAR to replace the word "and" with the word "or," as follows: "Use"--Means all aspects of "use," such as: operation, installation (including on-site installation) maintenance (checking), repair, overhaul, or refurbishing.

(2) Use of Foreign National's Country of Birth as Criterion for Deemed Export License Requirement -- The IG expressed concern over BIS's deemed export license policy of basing licensing requirements on a foreign national's most recent citizenship or permanent residency. The IG recommended that BIS amend its policy to require U.S. organizations to apply for a deemed export license for employees or visitors who are foreign nationals and have access to dual-use controlled technology if they were born in a country where the technology transfer in question would require an export license, regardless of their most recent citizenship or permanent residency.

(3) Clarification of Supplemental Questions and Answers on Government Sponsored Research and Fundamental Research -- The IG expressed concerns over certain questions and answers in Supplement No. 1 to part 734 of the EAR. Specifically, the IG found that two of the answers provided (answers to questions A(4) and D(1)) were inaccurate or unclear. As a result, BIS is proposing to revise these answers to address the IG's concerns.

Because these changes will require amendments to the EAR, BIS is interested in evaluating the potential impact that the recommended changes will have on U.S. industry, academic institutions, U.S. government agencies and holders of export controlled technology. As a result, BIS is soliciting comments from the public on the proposed changes to the EAR. BIS has stated that it is particularly interested in receiving specific information regarding the impact of the regulations, e.g., data on the number of foreign nationals in the United States who will face licensing requirements if the IG's recommendations were adopted, and impact of compliance with the new licensing requirements on cost, resources and procedures. BIS is also interested in receiving any alternative suggestions regarding the concerns raised by the IG. Comments must be submitted to BIS by May 27, 2005.

The ANPR can be viewed at the following link:



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