Proposed Export Rules Could Stifle Innovation

By Cameron
June 28, 2005

Update: Many organizations filed comments with BIS (the rumor has it around 200). The only one that we have seen so far (besides the CRA link at the bottom) is by the Association of American Universities. Apparently many business groups filed as well, including several IT and trade associations. We’ll post links to the big ones as they come in.

Original Post 6/28/05: Yesterday USACM filed comments with the Department of Commerce expressing deep concern about its proposal to change rules that apply to foreign nationals working in the United States using sensitive equipment. The committee objected to the proposal, stating that it could place new and costly burdens on the information technology sector and universities, and exacerbate an already hostile environment for foreign-born researchers working in the U.S., while providing questionable security gains.

Under long-established federal law, the Department of Commerce regulates the export of most commercial items by what is known as the United States’ Export Administration Regulations (EAR). The rules are intended to prevent sensitive “dual-use” items — items that have both commercial and military applications — from being exported to countries and entities considered to be hostile to United States’ interests. (Purely commercial items without an obvious military use are also subject to the EAR.)

But not all exports are physical commodities, nor must they leave the country. Many are so-called “deemed” exports, which occur when controlled equipment or technology (such as manuals, software, etc.) is released to or used by a foreign national within the United States. Only equipment and technology that is both controlled and proprietary is subject to the deemed export regulations.

In a report finished last year, The Inspector General (IG) argued that the current standards for licensing were too loose and that potentially hostile foreign nationals could still get access to controlled technology. The IG proposed three changes to close these loopholes:

  1. Amend the current definition of “use” technology by adding “or” to the definition of “use” by ensuring access to controlled technologies is limited to those involved in the “operation, installation (including onsite installation), maintenance (checking), repair, overhaul, and refurbishing;
  2. Begin using a foreign national’s country of birth, instead of the current practice of using a foreign national’s most recent citizenship or permanent residency, as the basis for determining deemed export licenses;
  3. Clarification of the supplemental questions used for understanding how the EAR is applied for the publication of government-sponsored research and the use of technology for fundamental research.

USACM commented on all three issues, but its overarching concern was that this proposal could hurt innovation:

“The proposed regulations and procedures make the existing EAR compliance process more complicated and opaque. An arguably greater fear is that deemed export control policy will ultimately have a chilling effect on research and development of new technologies in the United States by limiting or encumbering the work of talented individuals and encouraging organizations to move research activities overseas in an effort to remain competitive.”

The Computing Research Association also filed comments on the proposed rule. They have an in-depth and worthwhile analysis on their weblog.

For more background on this issue, see the Bureau of Industry and Security’s frequently asked questions document on deemed exports.