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FYI Number 76: June 5, 2006

Commerce Department Withdraws Proposed Deemed Export Regulations

The Department of Commerce has withdrawn proposed changes to regulations involving the access by foreign nationals to controlled technologies. Future changes to the deemed export control regulations will be reviewed by an advisory committee whose formation was announced in late May (see http://www.aip.org/fyi/2006/073.html.)

The Commerce Department's Bureau of Industry and Security published an advance notice of the proposed regulatory revisions in March 2005. The revisions were a response to a 2004 report issued by its Inspector General entitled, "Deemed Export Controls May Not Stop the Transfer of Sensitive Technology to Foreign Nationals in the U.S." In essence, the revisions would have required an institution to consider a foreign national's birthplace, and not just his or her current citizenship in deciding whether to apply for a license. In addition, the revisions would have expanded what was considered the "use" of a sensitive technology by such individuals.

The Department of Commerce requested comments when the proposed rulemaking was announced in 2005. There were 311 responses from academic institutions, law firms and legal associations, companies, trade associations, U.S. national laboratories, academic associations, Member of Congress, federal agencies, foreign governments, and individuals. The Commerce Department web site has 1,176 pages devoted to these comments, which can be read at http://efoia.bis.doc.gov/ (see Public Comments for June 27, 2005.)

"Almost without exception, the comments stated clear opposition" to the recommendation "that deemed export licenses be based on a foreign national's country of birth rather than country of citizenship." The notice in the May 31, 2006 Federal Register explained this opposition as follows: "Numerous comments expressed concern that excessive and bureaucratic requirements will foster a perception among foreign students and researchers that the United States does not welcome foreign nationals in its high-technology research community. Many comments observed that the decrease in the number of foreign nationals in U.S. academic institutions and U.S. industry has already been detrimental to the economy of the United States. These comments argued that a change in the deemed export licensing policy from country of citizenship to country of birth would further adversely impact the United States."

The other major proposed change was in regard to what is the use of a controlled technology, and involved the substitution of the word "or" for "and." The current definition requires six activities relating to the use of a controlled technology: operation, installation, maintenance, repair, overhaul, and refurbishing. As written in the May 31 notice, the Commerce Department explains: "it is the totality of those activities that [currently] triggers the requirement for a deemed export license." By substituting the word "or" for "and" in the list of the six activities, critics complained that the new regulation "would capture too many routine operations carried out by students/employees, and thus constitute a large (and generally unnecessary) compliance burden on organizations." The notice later states "organizations from all sectors appear concerned that a change in the definition would restrict the scope of fundamental research by capturing more routine activities that are currently not subject to the EAR [Export Administration Regulations]. Many public comments noted that such narrowing of the scope of fundamental research would have a chilling effect on U.S. research efforts conducted by industry and universities alike."

The comments received indicated the need for greater public outreach by the Bureau of Industry and Security (BIS). The notice concludes: "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."

The notice of the withdrawal of the proposed rulemaking appeared in the May 31, 2006 issue of the Federal Register. It may be read at http://www.gpoaccess.gov/fr/index.html In the search box for 2006, type page number 30840 (it is item #5 in the results list.)

Richard M. Jones
Media and Government Relations Division
American Institute of Physics
fyi@aip.org
301-209-3095

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