BIS Final Rule Implements Revised Formula for Calculating Computer Performance (APP Replaces MTOPS) (Part III)

The Bureau of Industry and Security (BIS) has issued a final rule which amends the Export Administration Regulations (EAR) to implement the Wassenaar Arrangement's December 2005 agreement to revise the formula for calculating computer performance from Composite Theoretical Performance (CTP) measured in Millions of Theoretical Operations Per Second (MTOPS) to Adjusted Peak Performance (APP) measured in Weighted TeraFLOPS (Trillion Floating point Operations Per Second) (WT).

This is Part III of a multi-part series of summaries on BIS' final rule and highlights changes to XP and missile technology controls and the replacement of License Exception CTP with License Exception APP. See future issues of ITT for additional summaries.

BIS notes that its final rule is effective on April 24, 2006, with the exception of the movement of Bulgaria from Computer Tier 3 to Computer Tier 1 in 15 CFR 740.7, which will be effective June 3, 2006.

XP Reason for Control

The final rule removes the reason for control related to high performance computers (HPCs) (XP) from Export Control Classification Numbers (ECCNs) 4A001, 4A003, 4D001, 4D002, and 4E001.

BIS states that at the present time, XP controls do not enhance license requirements or license review policies that are already in place under the national security (NS) controls described in 15 CFR 742.4, the anti-terrorism (AT) controls in various parts of 15 CFR 742, or any other controls in the EAR and create more of a burden to the public than assistance. BIS states that conforming changes are also made to 15 CFR 738.2(d)(2)(i)(A) and 746.3(a)(1).

Missile Technology Controls

This final rule removes the missile technology (MT) control from ECCN 4A003. BIS notes that because these computers are controlled under other ECCNs, this rule removes the MT control under ECCN 4A003. BIS states that the final rule also makes corresponding amendments associated with the removal of the MT controls under ECCN 4A003.

High Performance Computers

Now that the HPC controls are raised to a level such that only those of the greatest national security concern require a license for export, BIS expects that it will receive fewer license applications for computers. The license requirements that are stated in 742.12 are redundant to those stated in other parts of the EAR, such as national security (15 CFR 742.4), anti-terrorism (various sections of 15 CFR Part 742), or nonproliferation controls found in 15 CFR Part 744.

For these reasons, this rule removes 15 CFR 742.12. However, this rule will preserve the recordkeeping requirement for computers, mandated by the National Defense Authorization Act for FY 1998 (NDAA), by combining it with the special reporting requirements in 15 CFR Part 743. In addition, this rule moves the post shipment verification reporting and recordkeeping requirements, mandated by the NDAA, to new 15 CFR 743.2 "High Performance Computers: Post Shipment Verification Reporting." In addition, this rule revises 15 CFR 762.2(b)(6) that referred to the recordkeeping requirements that were in 15 CFR 742.12, to reference 15 CFR 743.2 where the recordkeeping requirement has been moved.

In conformance with the removal of 15 CFR 742.12, this rule revises a phrase in 15 CFR 734.4(a)(1) which stated "to Computer Tier 4 countries described in Sec. 742.12 of the EAR" and is revised to read "to Cuba, Iran, Libya, North Korea, Sudan, and Syria." BIS states that all references to Computer Tier 4 are no longer necessary, because the license requirements and license review policy for these countries is found in either 15 CFR Parts 736, 746, or 742 depending generally on its status as a country that supports terrorism or its embargo status.

In addition, this rule removes Supplement No. 3 to 15 CFR Part 742 "High Performance Computers; Safeguard Conditions and Related Information," because a sample security safeguard plan can be found on BIS' Web site at http://www.bis.doc.gov/hpcs/SecuritySafeguardPlans.html. The requirement for this security safeguard plan is added to paragraph (c)(2) of Supplement No. 2 to 15 CFR Part 748 "Unique Application and Submission Requirements" of the EAR.

License Exception APP (Formerly License Exception CTP)

Because this rule changes the computer formula for determining computer performance from CTP to APP, this rule revises the license exception symbol for License Exception CTP to "APP." This rule also makes conforming changes throughout the EAR because of this change.

"Use'' technology equal to or less than 0.75 WT is eligible for export under License Exception APP to Computer Tier 3 destinations and to Computer Tier 1 destinations, other than the destinations that are listed in 15 CFR 740.7(c)(3)(i).

Eligibility under License Exception APP for development and production technology and source code to Computer Tier 3 destinations and to Computer Tier 1 destinations, other than the destinations that are listed in 15 CFR 740.7(c)(3)(i), is set at an APP of less than or equal to 0.1 WT.

Eligibility under License Exception APP for development and production technology and source code to Computer Tier 1 destinations listed in 15 CFR 740.7(c)(3)(i) is set at an APP of less than or equal to 0.75 WT, because these destinations are of lesser national security concern.

(See ITT's Online Archives or 04/25/06 and 04/27/06 news, 06042515 and 06042720, for Parts I and II.)

BIS final rule (FR Pub 04/24/06, D/N 060404096-6096-01) available at http://a257.g.akamaitech.net/7/257/2422/01jan20061800/edocket.access.gpo.gov/2006/pdf/06-3647.pdf.