Export ControlsExport Controlsonon

Technology/Goods (EAA) Technology/Goods (EAA)

Ramin SeddiqHennah Shami

Jitka Sladka

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OverviewOverview

U.S. Department of Commerce’s Definition of an Export:Any item sent from the U.S. to a foreign destination, to include items like clothing, commodities, software, technology, etc.

Export have many modes of transportation

Source: http://www.bis.doc.gov/licensing/exportingbasics.htm

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OverviewOverview

Export Administration Regulations (EAR)

Export Control Classification Number (ECCN)

Where are you exporting to? What will the export be used for?

Source: http://www.bis.doc.gov/licensing/exportingbasics.htm

Overview: Classification

http://www.access.gpo.gov/bis/ear/ear_data.html#ccl

Source: http://www.bis.doc.gov/hpcs/default.hm 44

Overview: ClassificationOverview: Classification

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U.S. LawsU.S. Laws

• Export Administration Act of 1979• Section 1377 of the Telecommunications

Trade Act of 1988 (omnibus Act)• International Emergency Economic

Powers Act (IEEPA)• Intellectual Property Rights

Special 301 Section 337 of Tariff Act of 1930

Source: Hoekman, Bernard. The Political Economy of the World Trading System: From GATT to

WTO. New York: Oxford University Pres, 1995.

Commercial Encryption Export Controls

There are stringent U.S. Export Controls in place for software encryption.

U.S. encryption export policy is based on three guidelines• Review of the encryption products prior to sale.• streamlined post-export reporting• License review of certain exports and re-exports

of strong encryption to foreign governments.

Source: http://www.bis.doc.gov/encryption/ 77

Introduction of the EAAIntroduction of the EAA The Export Administrative Act (EAA) is the statutory authority for

the Export Administration Regulations (EAR), which are administered by the Bureau of Industry and Security (BIS) located in the Department of Commerce.

The Act provides for classification and licensing of dual-use exports by the Commerce department’s BXA.

The EAA regulations establish the framework for exports of sensitive dual-use goods and technologies: items that have both civilian and military applications, including those items that can contribute to the proliferation of nuclear, biological, and chemical weaponry.

Exports are restricted by item, country, and recipient entity.

Congressional Research Service Report for Congress – Septermber 28, 2007 88

Evolution of the EAAEvolution of the EAA Congress had not been able to find an agreement on

measures to reform the EAA. The EAA, which originally expired in september 1990, periodically has been reauthorized for short periods of time, with the incremental extension.

Legislation to rewrite the Export Administration Act was introduced in the 104th (1996) and 106th (1999) Congress. Export control legislation was again introduced on 107th (2001), 109th (2005) Congress with miner changes.

On August 3, 2007, Senator Dodd introduced the Export Enforcement Act of 2007. The bill would reauthorize the EAA for five years and amend the penalty and enforcement.

The EAA: Controversy and Prospects at http://www.ncseonline.org/nle/crsreports/econ-74.cfm1010

Parties involved Parties involved During debates on export administration legislation, there

are two major groups: 1) Liberalize controls to promote U.S. export - some

members of Congress and most U.S. business representatives see a need to liberalize U.S. export regulations to allow American companies to more engage in international competition for sales of high-technology goods.

2) Against liberalization to protect national security goals - other members of Congress and national security analysts and advisors argue that liberalization of export controls over the last 10 years has contributed to foreign threats to U.S. national security. Therefore, some controls should be tightened and further liberalization should be rethink carefully. 1111

Key provisions of the EAAKey provisions of the EAA National Security Controls

Foreign Policy Controls

Licensing and Dispute Resolution Process

International Arrangement, Penalties, and Enforcement

http://banking.senate.gov/docs/eaa/mprov01.htm 1212

Major ProblemsMajor Problems

Enforcing the varied types of export modes.• Email• Word of Mouth• Etc.

Too many Agencies and Departments in the enforcement of the law (I.e. State, Commerce, Energy, and Defense).

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High Performance Computers (HPCs)

United States export controls on computer technology originated in the Cold War era to prevent the Soviet Union and its allies from reaching military parity with the U.S. and its allies.

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Three primary aspects to computer export control

debate1. Performance-Based Controls - 1998

National Defense Authorization Act (NDAA).

2. End-Use Controls – Enhanced Proliferation Control Initiative (EPCI).

3. Knowledge Controls - "deemed export"

CRS Report for Congress, The EAA, 2007

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HPCs Advanced computers that can perform

multiple, complex digital operations within seconds. (aka: “supercomputers”).

Until recently the benchmark for gauging HPCs was:

Composite Theoretical Performance (CTP) measured in:

MTOPS – millions of theoretical operations per second. 190,000 MTOPS (2002).

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"Moore's Law" - power of microprocessors (chips) doubles every 18 months.

Many mass-market computer products will soon hit the MTOPS ceiling and be subject to unnecessarily restrictive controls.

Cost of computing drops nearly 25% per year. An increasing number of foreign competitors

have emerged - located in countries that do not belong to or do not strictly enforce multilateral or unilateral export control regimes.

“Clustering" and "parallel processing" - connecting many lower-level machines together to perform tasks at high speeds.

http://www.fas.org/sgp/crs/RL31175.pdf

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Adjusted Peak Performance (APP)

Adopted by BIS (Bureau of Industry and Security) in 2006. (Wassenaar Standard).

APP adjusted peak rate at which digital computers perform 64-bit or larger floating point additions & multiplications.

Measured by “weighted teraflops” (WT). Control level: 0.75WT (HPCs), 0.04WT

(software), 0.1WT (development).

CRS Report for Congress, The EAA, 2007

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04/11/2304/11/23

TOP 500 LIST DATA

Technology Curve

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Year

Perf

orm

an

ce

Moore’s Law is not a linear relationship.

PDR

CTP

APP

http://www.casc.org/meetings/sep06/young1.ppt#282,15,Slide 15

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Commerce Department Tiers

Tier 1 & 2 No license (NATO allies and a few other no/low risk countries).

Tier 3 Cautious approach (Russia, China, Israel, India, and Pakistan).

Tier 4 Virtual embargo (Cuba, Iran, North Korea etc…)

883 PLI/Comm 49

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License Exceptions TSR and APP Levels for Computers, Technology and Software

License Exception

Destination ECCN Former CTP level in MTOPS

Current APP level in WT

TSR §740.6

Country Group B, 4D001 & 4E001 75,000 to 190,000

0.04 to 0.1

APP §740.7

Computer Tier 1 4A003, except 4A003.e

Unlimited Unlimited

Subgroup of Computer Tier 1: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey or the UK

4D001 & 4E001 (except for 4A003.e)

Unlimited Unlimited

Deemed exports to foreign nationals of Computer Tier 1 (other than the subgroup of Computer Tier 1)

“Development” and “production” software (4D001) and technology (4E001)

75,000 to 190,000

0.04 to 0.1

Deemed exports to foreign nationals of Computer Tier 1 (other than the subgroup of Computer Tier 1)

“Use” technology (4E001) and source code (4D001)

75,000 to 190,000

0.04 to 0.75

Computer Tier 3 4A003 NONE NONE

Deemed exports to foreign nationals of Computer Tier 3 countries.

“Development” and “production” software (4D001) & technology (4E001)

75,000 to 190,000

0.04 to 0.1

Deemed exports to foreign nationals of Computer Tier 3 countries.

“Use” technology (4E001) and source code (4D001)

75,000 to 190,000

0.04 to 0.75

http://www.bis.doc.gov/hpcs/tsr.html#ftnt1

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Policy Proposal

1. Performance Controls on Computers Are No Longer Effective:

Reduce such performance-based controls; review and strengthen protections against the export or diversion of specially designed military software and databases.

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Policy Proposal

2. Proliferation End-User Restrictions Need Improvement:

Seek greater multilateral cooperation on export restrictions to WMD proliferators and rogue states.

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Policy Proposal

3. Reform employee access controls:

Provide U.S. IT companies with a free hand to complete internal projects using all their labor force.

Policy ProposalPolicy Proposal

4. Designate one Department/agency to enforce U.S. Export Control Regulations.

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Thank you for your Thank you for your attention!attention!

Questions?

For further information on U.S. Export regulations and controls please refer to the Department of Commerce, Bureau of Industry and Security’s webpage:

http://www.bis.doc.gov/index.htm2626