Export Controls – Deemed Export Advisory Committee Report

1. Export Controls – Deemed Export Advisory Committee Report NCURA Regional Spring Meeting April 27, 2008

2. DEAC Report – Opening Statement If you guard your toothbrushes and diamonds with equal zeal, you’ll probably lose fewer toothbrushes and more diamonds. McGeorge Bundy National Security Advisor to Presidents Kennedy & Johnson

3. Background • March 2004 IG report – • Commerce/Bureau of Industry and Security not protecting technology under deemed export rule • Lax application to industry and academia • Revise definition of “use technology” (and/or) • Look at country of origin, not current citizenship

4. BIS Response to IG • March 2005 ANPRM • Should definition of “use technology” be revised? • Use of country of origin? • May 2006 Notices • Will not revise definition • Will form a Deemed Export Advisory Committee to study the issue

5. Formation of DEAC • June 2006 • Balance among government, industry, and academia perspectives • Chair(s):

6. Analytic Services (former CIA) LSU (former NASA) UCLA NAM (former Gov. of Michigan) CO State USAF/CIA Duke/ORNL Penn State Applied Materials UVA BIS DEAC Membership

7. DEAC Meetings • Open and closed session • Six meetings • Washington, D.C. (2) • Santa Clara, CA • Atlanta, GA • Cambridge, MA • Chicago, IL

8. DEAC Observations • Build “high walls” around smaller areas- few highly sensitive technologies with significant military applications • U.S. is only nation that controls deemed exports and participates in multilateral export control regimes • Other countries relay on visa processes, intelligence, and commercial IP controls

9. DEAC Observations • U.S. Research enterprise would barely function without foreign nationals • NSF: • Graduation of U.S. citizen engineers declined by 20% over last two decades • 2/3 of engineering PhDs are granted to non-citizens • Greater use of dual-use, not just military, technology by DOD

10. DEAC Findings • Most technology will not be denied by U.S. export controls; it will be obtained by other countries • Current Commerce Control List is too all-encompassing – includes: • Police handcuffs • Hunting rifles • Conventional radios • Mass-market computers

11. DEAC Findings • Results of fundamental research not subject to deemed export rule but knowledge relating to operation of lab equipment may be subject to control. • Deemed export rule not working – only 1% rejected. 54% of applications from three U.S. companies.

12. DEAC Findings • Many “escapements” to the rule – foreign-born person who becomes U.S. citizen is not covered; most export violations by U.S. citizens • “Use” technology – “operation, installation, maintenance, repair, overhaul and refurbishing.” But what about collusion among team members to learn parts of the six? • Country of origin

13. DEAC Recommendations • Systematically review the CCL to remove low consequence items and technologies • Use a panel of scientific and engineering experts to conduct annual “sunset” review • Establish a category of “Trusted Entities” • Voluntarily elect to qualify for streamlined treatment

14. Deemed Export Design Construct

15. Deemed Export Design Construct

16. Deemed Export Design Construct

17. Deemed Export Design Construct • Step I – conduct overall assessment of probable loyalty of the individual • Include consideration of time and character of past and present foreign involvements • Indication of tie to terrorist-supporting country would result in denial • Step II – is information classified?

18. Deemed Export Design Construct • Step III – is military application truly significant? • Focus on nuclear weapon technology, toxic biologic agents, chemical warfare, cryptology • Step IV – is information readily available outside the US?

19. Deemed Export Design Construct • Step V – is activity fundamental research? • Old definition: “ordinarily published” • Proposed definition: • Falls within conventional definition (e.g. “curiosity-driven research seeking new knowledge”) or • Is not precluded from publication by contract or regulation

20. Deemed Export Design Construct • Step VI – is the organization seeking the license a Trusted Entity? • Once qualified, could transfer people, knowledge equipment based on self-assessment • Step VII – are there any remaining material adverse consequences, military, commercial, or political of a release?

21. Alternatives Rejected by the DEAC • Rely on security classification to protect information • Doesn’t account for commercial competitiveness • Rely on visa approval system to determine license approval • Visa review staff are not equipped to make commercial and national security decisions about leading-edge science and technology

22. BIS Response to DEAC Report • Increased training about deemed export rule • Plan to publish Fed. Reg. notice about what technology should be protected by the rule • Will convene a group of S&T experts for a “zero-based review” of CCL • Interested in flagging emerging technology • BIS is updating website to add guidance • Proposed rule on intra-company license exception • Would allow export to foreign affiliates • Under interagency review

23. BIS Response to DEAC Report • “Notice of Inquiry” to request comment • use of citizenship • develop objective criteria for considering • past and present nationalities and residences • when authorizing deemed exports • develop criteria for determining which technology should be protected

24. Post-DEAC Issues to Monitor • Future opportunities to comment • Technology • Use of citizenship • Definition of fundamental research • Deemed Export Design Construct would need to be revised and re-ordered to feasibly implement • Use of Trusted Entity concept