BIS Formally Withdraws Proposed Changes to Deemed Export Rule
As expected, the Bureau of Industry and Security (BIS) today published a notice in the Federal Register stating that the agency has decided to withdraw the March 28, 2005 Advance Notice of Proposed Rulemaking that proposed several changes to the "deemed export" rule. The most significant changes included using a foreign national's country of birth as a criterion for issuing a deemed export license and changing the definition of "use" technology.
With respect to the "country of birth" proposal, BIS stated that "based upon a thorough review of the [311] public comments and a review of foreign immigration requirements, BIS has determined that the current licensing requirement based upon a foreign national's country of citizenship or permanent residency is appropriate." Importantly, BIS recognized that:
While today's notice puts to rest the proposed changes to the "deemed export" rule it does not in any way modify the current requirements to obtain a license to transfer controlled technology to fforeign nationals in the U.S. if the transfer of that technology to the foreign national's home country would require an export license. Deemed export cases are high on the agenda of BIS's Office of Export Enforcement(OEE). OEE has recently stepped-up its enforcement of deemed export violations and during the past few months has imposed penalties on several companies for deemed export violations (see, e.g., Hexcel and Nvidia). BIS has also added additional staff members to investigate deemed export cases.
With respect to the "country of birth" proposal, BIS stated that "based upon a thorough review of the [311] public comments and a review of foreign immigration requirements, BIS has determined that the current licensing requirement based upon a foreign national's country of citizenship or permanent residency is appropriate." Importantly, BIS recognized that:
"many individuals may have ethnic ties to a particular nation, but bear no loyalty towards states where they were born. Further, BIS notes that an individual's act of obtaining citizenship or permanent residency adequately demonstrates affiliation and allegiance to the adoptive nation. Thus, the current deemed export licensing requirement, based on a foreign national's most recent country of citizenship or permanent residency, recognizes the importance of declarative assertion of affiliation over the mere geographical circumstances of birth."In addition, BIS "concluded that the existing definition of 'use' in Section 772.1 of the [Export Administration Regulations] EAR should remain unchanged" because "the existing definition of "use'' appropriately implements the underlying export control policy rationale in the EAR." Significantly, the notice confirms that "all six activities in the definition of 'use' must be present to trigger" a deemed export license requirement. With respect to concerns expressed by the research and academic communities regarding the application of the "deemed export" on fundamental research, BIS advised:
"It is essential to distinguish the information or product (which may be in the form of a scientific paper or publication that describes and/or details the results of the fundamental research) that results from fundamental research from the conduct that occurs within the context of the fundamental research. 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."BIS also indicated that "it is apparent that an expanded outreach program must be supplemented by a collaborative effort between BIS and the regulated community to ensure that the deemed export policy is consistent with evolving technologies and national security concerns." As a result, BIS will create a 12-person Deemed Export Advisory Committee (DEAC) that will review and provide recommendations to the Department of Commerce on deemed export policy. Details regarding the DEAC were published in the Federal Register last week.
While today's notice puts to rest the proposed changes to the "deemed export" rule it does not in any way modify the current requirements to obtain a license to transfer controlled technology to fforeign nationals in the U.S. if the transfer of that technology to the foreign national's home country would require an export license. Deemed export cases are high on the agenda of BIS's Office of Export Enforcement(OEE). OEE has recently stepped-up its enforcement of deemed export violations and during the past few months has imposed penalties on several companies for deemed export violations (see, e.g., Hexcel and Nvidia). BIS has also added additional staff members to investigate deemed export cases.
Labels: BIS
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