Norman Augustine
Chair, Deemed Export
Advisory Committee

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The Deemed Export Advisory Committee released today its report to BIS on BIS’s deemed export rules. The deemed export rules, among other things, require licenses prior to release of technology on a dual-use item to a national of a country if an a license would be required for the export of the particular dual-use item to the country in question.

The report is lengthy and I haven’t had time to review it fully, but an idea of the report’s contents can be gleaned from its epigraph:

If you guard your toothbrushes and diamonds with equal zeal, you’ll probably lose fewer toothbrushes and more diamonds.

— McGeorge Bundy

The diamonds apparently represent dual-use items and the toothbrushes represent the technical data regarding those items. So, not surprisingly, the report recommends loosening the deemed export rules in certain respects. Principally, the report recommends the creation of a “Trusted Entity” category. Trusted Entities would be companies and universities that meet certain criteria and that would therefore not be required to obtain individual export licenses to transfer dual use technologies to foreign nationals. Such foreign nationals would be required, however, to sign non-disclosure agreements.

But in another respect, the report recommends tightening deemed export rules when it wades into the tricky territory of permanent residents, dual nationals and individuals who have resided in multiple countries. Under current rules, the BIS looks at an individual’s current citizenship and/or legal permanent residence. The report recommends expanding the inquiry:

[We recommend] expanding the determination of the national affiliation of potential licensees to include consideration of country of birth, prior countries of residence, and current citizenship, as well as the character of a person’s prior and present activities, to provide a more comprehensive assessment of probable loyalties.

The report’s explication of this recommendation contains this example:

It would seem that inadequate distinction is made between an individual who, say, was born and raised in Iran but only recently became a citizen of the UK and an individual who was born in Iran but moved to the UK and became a citizen of the latter nation shortly after birth. Additionally, it would seem to be important to consider where that individual resided during his or her entire lifetime – not just where he or she was born or where his or her current citizenship has been granted. It is noteworthy that the current BIS interpretation is that the Deemed Export rule does not apply to persons lawfully admitted for permanent residence (i.e., green card holders), wherever their prior residences may have been.

(emphasis in original)

This analysis is sensible, but it also carefully finesses a significant problem. It is not clear whether the report is recommending that a foreign national admitted to lawful permanent residence in the U.S. should continue to be treated as a U.S. citizen for purposes of deemed exports or whether the rules should be revised to treat a U.S. permanent resident like any other foreign national and potentially subject to disqualification from deemed exports based on country of birth or country of former residence.

Next time you are in the airport, don’t be surprised if some ICE agents, dressed as Viking pillagers, come running after you in the jet-way screaming “What’s in your laptop?” At least that’s a possibility hinted at by BIS Assistant Secretary Darryl Jackson’s remarks to the ACI Conference on International Technology Transfer last Saturday.

In noting the means which are used by foreign governments to obtain controlled technology, Assistant Secretary Jackson cited “theft or other exploitation of laptops, PDAs and other data storage devices carried abroad by U.S. business persons, scientists and engineers.” Accordingly, he suggested that compliance programs should now determine whether “employees traveling overseas have controlled technology on their laptops or PDAs.”

Of course, the EAR, properly read, may currently prohibit employees from traveling outside the United States with laptops containing technical data relating to EAR-controlled dual use technology, depending on the technology and the country. License Exception TMP which allows temporary exports of “tools of the trade” such as laptops permits the temporary export of controlled software but not technical data. Proposals have been suggested to include technical data in License Exception TMP, but they so far have not been adopted by BIS. (Temporary export of laptops by U.S. citizens with technical data controlled by ITAR is permitted under most circumstances by ITAR § 125.4(b)(9) as long as the data is solely for the use of the departing U.S. citizen).

I am probably not stepping out on a limb by saying that dual-use technical data is probably routinely exported by U.S. employees traveling overseas with such data on their laptops, either because they are unaware of the problem or because of a mistaken belief that License Exception TMP applies. Nor has this been a particular enforcement priority by BIS in the past. But if BIS intends to start requiring licenses for temporary exports of laptops for personal use by traveling U.S. employees, this seems to be misguided, particularly where it seems premised mostly on the remote possibility that these laptops will be stolen or compromised. This concern is more properly addressed by enforcing the provision of License Exception TMP that requires the laptop to remain under the “effective control” of the exporter or the exporter’s employee.