BIS Final Rule Revises CCL to Conform With Wassenaar Changes, Addition/Expansion of Unilateral U.S. Controls, Etc. (Part X - Final)

The Bureau of Industry and Security (BIS) has issued a final rule, effective July 15, 2005, which revises certain entries on the Commerce Control List (CCL) that are controlled for national security reasons in Categories 1, 2, 3, 4, 5 Part I (telecommunications), 6, 7, 8, and 9, and definitions to conform with changes in the Wassenaar Arrangement's List of Dual-Use Goods and Technologies and Statements of Understanding maintained and agreed to by governments participating in the Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies (Wassenaar Arrangement).

In addition, this final rule adds Slovenia to the list of Wassenaar member countries in the Export Administration Regulations (EAR). This final rule also adds or expands unilateral U.S. controls on certain items consistent with the amendments made to implement the Wassenaar Arrangement's decisions.

This is Part X, the final part of a multi-part series of summaries on this BIS final rule. Part X covers changes made with respect to regulations concerning License Exception Computers (CTP), License Exception GOV, Wassenaar Arrangement, and certain definitions amended and removed from the regulations by this final rule. Part X also covers the "savings clause" for certain shipments.

15 CFR 740.7 - License Exception Computers (CTP)

CTP eligibility limit raised to 190,000 MTOPS (from 75,000 MTOPS) for deemed exports. According to BIS, this final rule raises the Composite Theoretical Performance (CTP) eligibility limit from 75,000 MTOPS to 190,000 MTOPS for deemed exports of computer technology and source code to foreign nationals of Computer Tier 3 destinations, because doing so will assist the computer industry in the area of research and development to advance computer technology, and because it will not adversely affect the national security of the U.S. BIS notes that certain deemed exports to Computer Tier 3 foreign nationals are subject to a Foreign National Review requirement.

BIS explains that digital computers capable of either 75,000 or 190,000 MTOPS are becoming more common. The Wassenaar Arrangement recognized this with its decontrol of hardware to 190,000 MTOPS. Most of the multi-processor computer servers sold in this range are for commercial applications. It is for these reasons that the Wassenaar Arrangement removed computer technology and software from the Annex 2 (Very Sensitive List), raised the Annex 1 (Sensitive List) threshold from "150,000 MTOPS'' to "190,000 MTOPS,'' and raised the control threshold under ECCNs 4D001 and 4E001 from "33,000 MTOPS'' to "75,000 MTOPS.''

Explanation of deemed export exception. BIS states that generally, Wassenaar Arrangement countries do not have in-country transfer controls (deemed export controls), with the exception of classified material. A deemed export is any release of technology or source code subject to the EAR to a foreign national within the U.S. Such release is deemed to be an export to the home country or countries of the foreign national.

BIS notes that the deemed export rule does not apply to persons lawfully admitted for permanent residence in the U.S. and does not apply to persons who are protected individuals under the Immigration and Naturalization Act (8 U.S.C. 1324b(a)(3)). Deemed export license applications for foreign nationals with dual citizenship should be based on the most recently obtained country citizenship. Applications for foreign nationals with temporary or permanent residence status of a third country (i.e., non-U.S. and a temporary or permanent residence status other than a foreign national's country of origin) should be based on the foreign national's country of citizenship.

Because the U.S. is one of the only Wassenaar Arrangement member countries to implement deemed export controls, BIS states that U.S. industry has been required to obtain license authorization for these deemed exports when other Wassenaar Arrangement member countries have not imposed such controls on their industries. Expanding the availability of a License Exception for deemed exports of computer technology and source code provides relief from licensing burdens for U.S. industry and levels the playing field in global competition. BIS agrees with the analysis of the Wassenaar Arrangement and has decided that the expansion of license exception availability under the technology parameters set forth above will not have an adverse impact on the U.S. national security, and will assist in strengthening the U.S. national security through advancements in computer technology.

BIS has subsequently issued a correction to this sentence noting that such license applications should be based on the most recently established residency.

15 CFR 740.11 & Supplement No. 1 to 15 CFR Part 740.11 - License Exception GOV

Removal of certain restrictions for computer software. According to BIS, the Wassenaar Arrangement agreed to remove computer technology and software from the Annex 2 (Very Sensitive List) for reasons stated in a note under Category 4 (see Part VI of BP's summary). Therefore, this final rule removes the restrictions for computer software classified under ECCN 4D001 and computer technology under ECCN 4E001 under License Exception Governments, International Organizations, and International Inspections under the Chemical Weapons Convention (GOV) for: (1) The official use of any agency of a cooperating government within the territory of any cooperating government; (2) the official use of a diplomatic or consular mission of a cooperating government located in any country in Country Group B (see Supplement No. 1 to 15 CFR part 740); and (3) the official international safeguard use of the International Atomic Energy Agency (IAEA) and the European Atomic Energy Community (Euratom). However, the access of computer restrictions by nationals of countries in Country Group E:1 will be retained in new 15 CFR 740.11(a)(4).

Computers removed from list of items excluded from eligibility under License Exception GOV. In addition, this final rule removes computers from the list of items excluded from eligibility under License Exception GOV to the Organization for Prohibition of Chemical Weapons (OPCW). However, the access of computer restrictions by nationals of countries in Country Group E:1 will be retained in new 15 CFR 740.11(c)(4).

Miscellaneous changes to 15 CFR 740.11. In addition to the above described changes, BIS states that the following amendments are made to 15 CFR 740.11 in this final rule:

(1) 15 CFR 740.11 is amended by removing and reserving paragraphs (a)(2)(ii), (a)(2)(iii), and (a)(2)(vi)(A). In addition, the Note to 15 CFR 740.11(a)(2)(iii) is removed.

(2) Supplement No. 1 to 15 CFR 740.11 is amended by removing and reserving paragraphs (a)(1)(vi)(A), (a)(1)(vii)(B), (b)(1)(vi)(A), and (b)(1)(vii)(B).

(3) Because of the redesignation of the paragraphs in 6A001.a.2, concerning hydrophones, the following corresponding revisions were made to 15 CFR 740.11 and Supplement No. 1 to 15 CFR 740.11 to ensure that all cross-references are accurate:

• 15 CFR 740.11 is amended by revising paragraph (a)(2), and
• Supplement No. 1 to 15 CFR 740.11 is amended by revising paragraphs (a)(1), (a)(1)(vii)(D), (a)(1)(vii)(E), (b)(1), (b)(1)(vii)(D), and (b)(1)(vii)(E).

15 CFR 742.12 - High Performance Computers

In this final rule, BIS is amending 15 CFR 742.12 by revising the phrase "greater than 75,000 MTOPS.'' to read "greater than 190,000 MTOPS.'' in paragraph (a)(3), to harmonize the CTP value in this paragraph with the Wassenaar reporting requirement in 15 CFR 743.1(c)(2).

15 CFR 743.1 - Wassenaar Arrangement

BIS states that 15 CFR 743.1 is amended by revising the phrase "having a CTP exceeding 75,000 MTOPS.'' to read "having a CTP exceeding 190,000 MTOPS.'' in paragraph (c)(2), because the Wassenaar Arrangement agreed to raise the threshold to 190,000 MTOPS in the Sensitive List (Annex 1).

Definitions Amended and Removed from 15 CFR Part 772

"Allocated by the ITU" has been amended. BIS states that the definition of "Allocated by the ITU'' has been amended by revising which International Telecommunication Union (ITU) Radio Regulations should be consulted for the allocation of frequency bands, from "edition 1998'' to "current edition of the'' ITU Radio Regulations.

"Stored program controlled" has been removed. According to BIS, the definition of "Stored program controlled'' was removed from the Wassenaar Arrangement's definitions because most equipment is computer controlled now and the term no longer adds any value to the control, therefore the term has been removed from many paragraphs in the CCL.

However, BIS will retain this definition in 15 CFR part 772, because the term is still used in some ECCNs controlled for anti-terrorism reasons, e.g., ECCNs 3B991, 4B994, and 5A991, and to remove the term from these entries would allow the rare instance of manually controlled equipment to be used in nefarious ways.

"Savings Clause" for Certain Shipments

According to BIS, shipments of items removed from license exception eligibility or eligibility for export without a license as a result of this regulatory action that were on dock for loading, on lighter, laden aboard an exporting carrier, or en route aboard a carrier to a port of export, on August 15, 2005, pursuant to actual orders for export to a foreign destination, may proceed to that destination under the previous license exception eligibility or without a license so long as they have been exported from the U.S. before September 13, 2005. However, BIS notes that any such items not actually exported before midnight, on September 13, 2005, require a license in accordance with this regulation.

(BIS notes that although the Export Administration Act expired on August 20, 2001, Executive Order 13222 of August 17, 2001, as extended by the Notice of August 6, 2004, continues the Regulations in effect under the International Emergency Economic Powers Act.)

(See ITT's Online Archives or 07/19/05, 07/22/05, 07/25/05, 07/26/05, 07/27/05, 07/28/05, 07/29/05, 08/01/05, and 08/02/05 news, 05071930, 05072215, 05072515, 05072620, 05072725, 05072825, 05072925, 05080125, and 05080235, for Parts I - IX of BP's summary.)

BIS final rule (D/N 050607153-5153-01, FR Pub 07/15/05) available at http://a257.g.akamaitech.net/7/257/2422/01jan20051800/edocket.access.gpo.gov/2005/pdf/05-13581.pdf.