BIS Update 2005 - Day Two
After providing an overview of what the deemed export rule is and how it works, the BIS staff discussed the advance notice of proposed rulemaking on proposed changes to the deemed export regulations proposed by the U.S. Department of Commerce's Inspector General. BIS noted that many of the comments submitted on the proposed rule demonstrated a great misunderstanding of the deemed export rule. For example, BIS learned that many people and academic institutions had little knowledge or understanding of the deemed export rule even though it had been in place since 1995. In addition, the comment process that generated a record number of comments (300+) demonstrated that many companies and universities had very little familiarity with the Commerce Control List and classification process. In addition, BIS learned that many institutions had been incorrrectly using the fundamental research exemption as an umbrella for insulating themselves from export control requirements. As a result, BIS has been conducting outreach sessions and to date has conducted more than 120 outreach programs with universities and research facilities. The final rule is still in the interagency review process and no final decisions or release date have been announced.
With respect to licensing, BIS processed 707 deemed export license in the past 12 months, which represented a 30% decrease in licensing volume from the previous year. The decrease in license applications was due, in part, to regulatory changes made to the export of high performance computer technology. Most of the licenses related to technology classified in categories 3, 4 and 5 of the CCL. More than 90% of the license applications were granted, less than 1% were denied (the remainder were returned without action) and the average deemed export license processing time is about 42 days. Almost 60% of the deemed export licenses that are being submitted are for nationals of China, followed in order by foreign nationals from India, Iran, Russia and the U.K.
The proposed rule to remove licensing exemption for export of missile technology (MT) control items to Canada is still in interagency review. However, because the final rule is imminent, the BIS staff recommended that U.S. companies should review their employees involved in MT work to ensure that the appropriate license will be obtained.
The Office of Export Enforcement (OEE) reiterated that all companies engaged in software development and/or technology transfer should pay close attention to encryption and technology transfer restrictions. OEE discussed the Lattice Semiconductor and Fujitsu (Fujitsu paid $125,000 penalty for employing foreign nationals from the PRC and Ukraine to conduct research on the
development and manufacturing of commercial digital fiber-optic transmission and broadband switching equipment, software and technology without the required BIS licenses) enforcement cases. BIS noted that in both cases the companies had voluntarily disclosed the violations and thus were able to reduce their potential penalties.
The final part of the program discussed the importance of developing and the essential elements of Technology Control Plans (TCPs). TCPs are a standard condition of approval for deemed export license and a review of a company's TCP is a typical agenda item for a BIS site visit. BIS stressed that there is no one-size-fits all approach to TCPs and that companies should give a great deal of thought to the manner that they will protect their controlled technology.
For the play-by-play call of the other sessions of the second day of Update 2005, see Scott Gearrity's Export Control Blog.