For Computer Technology and Software: BIS Expands License Exceptions for "Deemed Exports, " Clarifies License Exception CTP, Adds Foreign National Review for CTP "Deemed Exports," Etc

The Bureau of Industry and Security (BIS) has issued a final rule that amends 15 CFR Parts 740, 748, and 774 effective November 5, 2004, to expand the availability of license exceptions for certain "deemed exports" of computer technology and source code under the Export Administration Regulations (EAR).

Among other things, this final rule also clarifies certain provisions of License Exception CTP for certain computer and technology software, establishes a new "Foreign National Review" (FNR) requirement for deemed exports of technology and source code under License Exception CTP, etc.

(See ITT's Online Archives or 10/31/03 news, 03103115, for BP summary of proposed rule. Note that proposed rule covers the subject matter of this final rule, as well as the subject matter of another final rule also published on November 5, 2004. See future issue of ITT for BP summary of this second final rule.)

Highlights of Final Rule

22 Tier 1 countries continue to be eligible to receive technology/software for computers with unlimited CTP under License Exception CTP (rather than License Exception TSR). According to BIS' final rule, the 22 countries previously eligible to receive technology and software for computers with unlimited CTP under License Exception TSR continue to be eligible for export and reexport of unlimited CTP level of technology and software, but this eligibility is now pursuant to License Exception CTP. All of these 22 countries are in "Computer Tier 1'' for purposes of License Exception CTP.

Group B countries continue to be eligible to receive certain technology/software under License Exception TSR. This final rule provides that countries in Country Group B previously eligible to receive technology and software for computers and electronic assemblies classified under ECCN 4A003.b and ECCN 4A003.c, respectively, with a CTP less than or equal to 33,000 MTOPS under License Exception TSR continue to be eligible for export and reexport under License Exception TSR. In addition, technology and software for other equipment, i.e., not controlled under ECCN 4A003.b and ECCN 4A003.c, controlled under ECCNs 4E001 and 4D001 will also continue to be eligible for export and reexport under License Exception TSR.

License Exception TSR eligibility amended for ECCNs 4D001 & 4E001. This final rule amends License Exception TSR eligibility paragraphs under ECCNs 4D001 and 4E001 for certain controlled computer technology and software, so that technology and software with a CTP greater than 33,000 MTOPS to the 22 countries previously listed in the TSR paragraph is no longer eligible for export and reexport under TSR.

License Exception CTP added to ECCNs 4D001 & 4E001. In addition, this final rule adds License Exception CTP to the License Exception section of ECCNs 4D001 and 4E001. License Exception CTP formerly applied to only computer hardware classified under ECCN 4A003.

Deemed exports of certain computer technology and source code for Computer Tier 1 destinations other than the 22 countries, etc. This final rule provides that for Computer Tier 1 destinations other than the 22 countries, technology and source code for computers with a CTP equal to or less than 190,000 MTOPS are eligible for deemed exports under License Exception CTP. Actual exports and reexports of computer technology and software will continue to be controlled for export and reexport under ECCNs 4D001 and 4E001 when the CTP exceeds 28,000 MTOPS, and eligible for License Exception TSR when the CTP is equal to or less than 33,000 MTOPS to Computer Tier 1 countries that are also Country Group B countries.

Deemed exports of certain computer technology and source code to Computer Tier 3 nationals, etc. This final rule provides that technology and source code for computers with a CTP equal to or less than 75,000 MTOPS are eligible for deemed exports under License Exception CTP to foreign nationals of Computer Tier 3 destinations. Certain deemed exports to Computer Tier 3 foreign nationals are subject to an FNR requirement.

BIS adds that exports and reexports to countries in Country Group E:1 (terrorist supporting countries) continue to be ineligible for License Exception CTP. The final rule contains a chart showing the new eligibility thresholds for different groups of countries under License Exception CTP.

BIS Imposes Foreign National Review Requirement for Certain Tier 3 Nationals Under License Exception CTP

This final rule imposes a FNR requirement for deemed exports of specified computer technology and source code under License Exception CTP and 15 CFR 748.8(s) and (t), and Supplement No. 2 to 15 CFR Part 748. Prior to disclosing eligible technology or source code to a foreign national under License Exception CTP, an exporter must submit an FNR request to BIS. The features of the FNR include:

FNR only for certain Computer Tier 3 nationals. The FNR requirement only applies to foreign nationals from a country in Computer Tier 3 that is not also a country listed in Country Group B of Supplement No. 1 to 15 CFR Part 740. The exporter must confirm eligibility from the System for Tracking Export License Applications (STELA) or the Simplified Network Application Procedure (SNAP) prior to using License Exception CTP.

Form and information required for FNR request. FNR requests must be submitted using Form BIS-748P (Multipurpose Application), or its electronic equivalent, and must include information about the foreign national who is to receive the computer technology and source code. The information required for the FNR request is set forth in paragraphs (s) and (t) of Supplement No 2 to 15 CFR Part 748. BIS will electronically refer the FNR request for interagency review within nine business days or, if necessary, return the FNR request without action to the applicant, e.g., if more information is necessary. Upon receipt of the BIS referral, the agencies have 30 days in which to return a recommendation to BIS. License exception CTP may not be used until the exporter has received official notification from BIS.

Exporters with Current Licenses for Deemed Exports to Computer Tier 3 Foreign Nationals That Become Eligible for License Exception CTP

Exporters who have current licenses for deemed exports of computer technology or source code to Computer Tier 3 destination foreign nationals that become eligible for License Exception CTP are no longer bound by conditions on their licenses, as provided under 15 CFR 750.7. Termination of license conditions does not relieve an exporter of its responsibility for violations that occurred prior to the availability of the License Exception.

Although most licenses for computer technology and source code have been issued to companies who employ Computer Tier 3 destination foreign nationals in their U.S. facilities and who hold work visas issued by the U.S. Government, the availability of License Exception CTP for deemed exports is not confined to employer releases of technology to employees. It is alsoavailable for deemed exports of technology and source code to Computer Tier 3 destination foreign national visitors and customers, under the procedures set forth in License Exception CTP.

(Although the Export Administration Act expired on August 20, 2001, Executive Order 13222 of August 17, 2001 (3 CFR, 2001 Comp., p. 783 (2002)), as extended by the notice of August 6, 2004, published in the Federal Register on August 10, 2004 continues the Regulations in effect under the International Emergency Economic Powers Act.)

See BIS' final rule for additional amendments that appear to be editorial in nature.

The 22 countries (which are part of Computer Tier 1) are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, and the United Kingdom. See BIS' final rule for a listing of the remaining Tier 1 computer countries, as well as a list of Computer Tier 3 countries and non-eligible countries.

BIS Contact - Sharron Cook (202) 482-2440

BIS Final Rule (D/N 041020285-4285-01, FR Pub 11/05/04) available athttp://a257.g.akamaitech.net/7/257/2422/06jun20041800/edocket.access.gpo.gov/2004/pdf/04-24679.pdf