COGR: Commerce Withdraws ANPR on Deemed Exports
The Commerce Department Bureau of Industry and Security (BIS) announced today (Fed. Reg.: Vol. 71; No. 104; pp. 30840-30844) that it is withdrawing the Advanced Notice of Proposed Rulemaking (ANPR) that was published in March of 2005 with regard to the Commerce Office of Inspector General (OIG) recommendations on deemed exports. Basically BIS has rejected all of the OIG recommendations.
1. The announcement states that with regard to the OIG recommendation to base deemed export licensing requirements on a foreign national's country of birth, "BIS has determined that the current licensing requirement based upon a foreign national's country of citizenship or permanent residency is appropriate." (BIS still may want to review certain dual citizenship situations).
2. With regard to the recommendation to change the definition of "use" in the Export Administration Regulations (EAR) in the context of controlled technologies, the announcement states that "After thorough review, BIS has concluded that the existing definition of "use" in Section 772.1 of the EAR should remain in the conjunctive. As such, the word "and" is appropriate and the definition of "use" remains unchanged: All six activities in the definition of "use" must be present to trigger a license requirement. Changing "and" to "or" in the definition, as suggested by the OIG, would lead to a situation in which mere operation of a controlled item by a foreign national could trigger the requirement for a deemed export license. Consequently, BIS has determined that revision to the existing definition would result in an expansion of deemed export license applications imposing a substantial licensing burden on the regulated community, without a corresponding benefit to national security. Hence, the definition of "use" remains unchanged."
3. On the final recommendation to modify the guidance in EAR Part 734 Supplement 1 Qs and As, BIS rejects the need to make any changes but concludes that an expanded outreach program is necessary to clarify the guidance provided, 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." Several other statements in the announcement are of interest. The announcement notes "some misapprehension as to the scope of the existing regulations as they relate to academic and research institutions...Although the OIG Report refers to an "exemption" for fundamental research, the EAR generally does not refer to items or activities that are not subject to the EAR as "exemptions." As outlined in Part 734, items and activities are either subject to the EAR or they are not subject to the EAR....the EAR addresses the jurisdictional scope of fundamental research and sets forth specific parameters and limitations that would take such activities and products resulting from fundamental research outside of the scope of the EAR." In other words, BIS agrees with our view that fundamental research is excluded from the EAR, and not just one of the EAR exemptions.
While for the most part the announcement represents good news for the university research community, one aspect remains of concern. In the announcement BIS distinguishes the information or product (i.e. a scientific paper) that results from fundamental research from the conduct that occurs within the context of the research. The product is not subject to the EAR, but a license still may be required if "during the conduct of the research controlled technology is released to a foreign national." The announcement goes on to assert that this distinction between the research results and the conduct involved in the research is consistent with NSDD-189.
In our comments on the ANPR, we expressed the view that the conduct of research cannot be segmented or distinguished from the results for purposes of NSDD-189 and the fundamental research exclusion from export controls. Under the BIS interpretation, licenses still may be required for access to controlled use technology unless it meets the "publicly available" or other exemption. Further clarification is needed on this point, especially given that the Section 734 Qs and As (specifically DI) remain unchanged. However, in any event the potential impact with regard to license requirements for foreign national access to preexisting technology will be lessened by the rejection of the OIG "and/or" recommendation on equipment use.
The Notice also indicates that many of the criticisms and reforms of deemed export controls suggested in the public comments are beyond the scope of the ANPR, but will be subject to review by the new Deemed Export Advisory Committee (Fed. Reg.: Vol. 71, No. 98; pp. 29301-29303; 5/22/06).
We
appreciate BIS's recognition in the announcement that export controls
must take into account the critical contribution of foreign nationals
to U.S. fundamental research, and the negative impacts and burdens particularly
for universities that would have resulted from adoption of the OIG recommendations.
Robert Hardy <rhardy@cogr.edu>
Director, Contracts and Intellectual Property Management Council on Governmental
Relations
1200 New York Ave. NW Suite 750
Washington DC 20005
(202) 289-6655