Where Industry and Security Intersect
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The Deemed Export Advisory Committee (DEAC) met in open session on May 2, 2007, at the Georgia Institute of Technology, Georgia Tech Research Institute (GTRI) Conference Center, 250 14th St., Atlanta, GA, 30318. The open session was called to order by the Chairman at
8:32 a.m. and adjourned at 11:37 a.m.
The DEAC is a Federal Advisory Committee set up under the requirements of the Federal Advisory Committee Act. It is tasked to advise the Secretary of Commerce on deemed export policy. There were approximately 70 members of the public in attendance.
DEAC Members Present: DEAC Members Absent:
Mr. Norm Augustine, Chairman
Dr. Ruth David, Co-Vice Chair
The Honorable Sean O’Keefe, Co-Vice Chair
Dr. Albert Carnesale
Dr. Eva J. Pell
Dr. James N. Siedow
Mr. Michael Splinter
Dr. William A. Wulf
The Honorable John Engler
Mr. Anthony Frank
Mr. John Gordon
Note: The text that appears next to or below each speaker’s name is a summary of that individual’s remarks or statement.
Chairman’s Opening Remarks: Mr. Augustine called the meeting to order and welcomed members of the DEAC and the public. He thanked Dr. G. Wayne Clough, the President of Georgia Tech, for hosting the meeting and added that the Deemed Export Advisory Committee (DEAC) welcomes all views and comments during the open session.
Designated Federal Official’s Opening Remarks:
Mr. Bernie Kritzer, Director, Office of National Security and Technology Transfer Controls, Bureau of Industry and Security (BIS), U.S. Department of Commerce, (the DEAC’s Designated Federal Official) welcomed and also thanked Georgia Tech for hosting the meeting. He stated that a lot has happened since the last DEAC meeting in Santa Clara, CA, in January. Mr. Kritzer restated the mission of the DEAC and said that there were two particular items he wanted to touch on in his remarks.
First, the Bush Administration has proposed The Export Enforcement Act of 2007, federal legislation aimed at providing law enforcement with enhanced tools in the fight against terrorism and the creation of weapons of mass destruction. The Administration has been working with Congress since 2001 to reauthorize the Export Administration Act of 1979 (EAA). As proposed, the Export Enforcement Act of 2007 would revise and renew the export enforcement and violation provisions of the EAA of 1979, while enhancing enforcement authorities and penalties for combating illicit exports of dual use items that have predominantly civilian uses, but can also have military, proliferation, and terrorism-related applications. The Administration's bill underscores the fact that export control laws are essential components of our national security. The bill provides vital tools that federal law enforcement agents need in the fight against terrorism and the proliferation of weapons of mass destruction.
Second, through the Sense of the Senate, the Alexander Amendment was passed. The language contained in the Amendment state that:
--U.S. Government policies related to deemed exports should safeguard U.S. national security and protect fundamental research;
--The DOC has established the DEAC to develop recommendations for improving current controls on deemed exports;
--The Administration and Congress should consider the recommendations of the DEAC in its development and implementation of export control policies.
Mr. Kritzer concluded by stating that over the course of the day, the DEAC would receive a site tour of several of the University’s labs. He said that his staff has organized several future meetings as well, one in mid-June and late July, and a final meeting later in September. He elaborated on the procedures used by BIS to publish notice of these meetings, and stated that he and his staff are glad to be here and to serve the needs of the DEAC. He then introduced Mr. Norm Augustine, Chairman of the DEAC.
DEAC Chairman’s Opening Remarks: Mr. Augustine expressed appreciation for the willingness of Georgia Tech to host and share its experiences with the DEAC. He also went on to say that the University’s President is well-known to most of the Committee; that he takes an avid interest in what is happening in the United States as well as abroad; and he looked forward to hearing what he has to say. He then introduced Dr. G. Wayne Clough, President of Georgia Tech.
Recommendations:
--Provide universities with the greatest amount of flexibility that can be given within reason. We would like to be able to work with our foreign colleagues in a relatively open environment – if it is possible.
--We need clarity because today we do not have that. The rules seem to constantly change and different agencies seem to implement rules and regulations differently, driving the system in multiple directions.
--Chuck Vest, at the 2006 education summit, commented, “Build high fences around small areas.” Georgia Tech is used to doing that because it conducts both classified and unclassified research. If you were to identify those areas where there is concern, we can work with that. Try not to identify large areas, such as saying that you want to protect nanotechnology. But if you identify those areas within nanotechnology that you want to protect, we can do that. We just need clarity on this issue.
DEAC Members’ Opening Remarks:
Following Dr. Clough’s remarks, the Chairman provided some general thoughts on where he believed the Committee might be headed. Mr. Augustine stated that the current deemed export regime was designed for another era where there was a primary and identifiable military threat to the United States and this country led the world in science and technology (S&T). He said it is not the same as today. The U.S. economy is now seriously threatened by this country’s declining S&T talent and this may cause a serious threat to our economy and our country if we are not able to compete globally.
Dr. David added that the DEAC needs to decide what needs to be inside the high fences. She welcomed the input the DEAC had received thus far and stated that she hoped to hear more tangible ideas about what changes need to be made and not as much about what is wrong with the current deemed export regime.
Dr. Wulf said that although the Committee is chartered to look only at deemed exports, it is difficult to do that without looking at the broader subject of U.S. export policy.
Dr. Carnesale looked at the situation from a different perspective. He said that the threat to U.S. national security comes equally from U.S. citizens as it does from foreign nationals working at U.S. institutions. He also challenged the requirement that all six attributes be present for “use” technology to exist (as set forth in the deemed export regulations) and said that six individuals could easily gather the necessary information and that it did not have to be only one person assimilating it all. His metaphor for deemed exports was having 6 locks on every window while the door remained wide open.
Dr. Pell commented that the DEAC must find a way to maximize a university’s educational potential while minimizing the risk in those areas where risk is unacceptable.
Dr. Seidow said that prior to the Department of Commerce’s Inspector General’s March 2004 report, educational institutions had not paid much attention to export controls. After the report, there was an attempt to establish processes and fully consider and apply the regulations . We need to define a set of rules that apply to the present-day playing field, recognizing that industry and universities do not always operate in the same way.
Mr. Michael Splinter said that we operate in a very fluid world, not only beyond borders, but one in which change occurs at a rapid pace. What is needed are a set of rules that can allow the United States to react with greater speed, but also with more predictability. Finally, the rules need to be dynamic so that they can adapt as the world in which we operate continues to evolve. Something new will evolve tomorrow, and the rules need to be flexible enough to protect tomorrow’s technology as well as today’s.
SCHEDULED PRESENTERS:
Dr. Winfred M. Phillips, Vice President for Research, University of Florida
Recommendations:
--Recognize the truth about “click on” licenses and maintain an understanding that all six attributes must be present for “use” technology to exist as Commerce has wisely decided to do.
--Classification works; it is the appropriate way to control technical information on campus when there is a known potential to pose a real security risk.
--We need to focus on U.S. borders where effective visa screening can take place, thus negating the need for deemed export controls.
Dr. Charles Liotta, Vice Provost for Research and Dean of Graduate Students, Georgia Institute of Technology
Recommendations:
--“Build high walls around small places.”
--Retain the use of classification to protect those technologies for which release would truly compromise national security interests.
--Improve the visa process so that individuals who are approved to attend U.S. universities are also approved to benefit fully from educational opportunities and participate in all research programs.
--The Department of Commerce is encouraged to retain the “and” understanding of the definition of “use” technology, that is, the requirement that all six attributes must be present for “use” technology to exist under the EAR.
--The U.S. government should work to harmonize export control regulations under the EAR and the International Traffic in Arms Regulations (ITAR) for consistency based on NSDD 189.
Mr. David Brady, Director, Export and Secure Research Compliance, Virginia Polytechnic Institute & State University
Remarks: Virginia Polytechnic Institute (Virginia Tech, or VT) conducts over $320 million per year in research; $200 million of that is sponsored research. The school has over 27,350 undergraduate students, 1,921 of which are foreign nationals. Its graduate students total 6,100 and out of those, 1,491 are foreign nationals. VT has 5,087 actively sponsored research awards, but only about 1% are export controlled. VT is comprised of several academic units, and hundreds of individual labs conducting research that could be subject to the EAR or that may contain equipment and materials subject to the EAR. Deemed export compliance activities account for about 70-80% of the current VT export control compliance budget.
Research-specific deemed export compliance is accomplished by a series of repetitive actions performed with technical judgment dealing with commodity jurisdiction/classification and export license determination. These actions require a combination of technical and regulatory expertise.
Current deemed export regulations assume any research and development activities are subject to the EAR unless otherwise excluded. When dealing with export compliance equipment, we have open campuses and we often use the same equipment in education and research (both fundamental and proprietary). Much of this equipment is available for visual inspection by foreign nationals. Graduate students routinely tear equipment apart and rebuild it with entirely different parts. This presents a real dilemma when it is hard to figure out what is regulated and what is not.
The administrative burden of deemed export compliance requires a number of repetitive actions and the regulations are vast. VT has a large number of offices on campus that deal with deemed export compliance activities. For instance, VT screens about 2,600 proposals, 4,800 equipment usage, from 25-100,000 materials usage, and 1,000 contractual agreements per year. Review of these proposals for deemed export issues puts a financial burden on the university since these cost are non-recoverable. The total cost for deemed exports is about $300,000, but this does not include faculty time involved in CCL classifications or commodity jurisdictions. From VT’s perspective, the return on investment in policing low tech deemed exports appears very low, and the regulations need to be changed to protect “nationally significant technologies.” VT has concluded that the Commerce Control List is the biggest problem; it is too broad in scope and is out of date and cumbersome. It is also difficult to teach and learn, and it restricts technologies that are publicly available worldwide. Many vendors have no idea if their product is CCL listed, and proprietary research, as addressed in the EAR, is overly broad.
Recommendations:
--Deemed export regulations should restrict a few technologies that truly require nationwide protection from disclosure at universities, and not restrict the vast quantity of technologies that do not. (“Put very high walls around a very few critical technologies, and de-emphasize those that are not state of the art.”)
--De-emphasize or delete deemed exports of technologies to “develop”, “produce” or “use” low tech items controlled by Anti Terrorism (AT), Regional Stability (RS), Crime Control (CC), Firearms Convention (FC), United Nations Embargo (UN) CCL 900-999 series) and low tech/outdated tech controlled by National Security (NS).
--Develop a procedure to expedite removal or de-emphasis of technologies that are no longer “cutting edge.”
--Remove “not elsewhere specified, or N.E.S.” designations in the EAR wherever possible.
--Revise the EAR’s fundamental research definition and create a restricted research definition to align with the purpose of the EAR. R&D activities under the EAR are divided into three categories: fundamental research, proprietary research, and industrial development. Suggested redefinitions include:
Fundamental research: “The intent behind these rules is to identify as ‘fundamental research’ research and development where the resulting information is ordinarily published and shared broadly within the scientific community.”
Consider dropping the term “Proprietary” from the EAR and substituting it with “Restricted Research.” This new term can be defined as, “Restricted research is research, performed under publication, access, or national security restrictions, the results of which include specific information (including source code) necessary for the development, production, or use of a product subject to the Commerce Control List.”
Redefine “publication restrictions” as they apply to export controls. Publication restrictions are not defined in the EAR, but there are still time limits triggering a “subject to the EAR” review. These time limits seem arbitrary. There needs to be a well understood definition of what constitutes a temporary development per 15 CFR Sec 734.8 and why. (At present, VT is reviewing 100% of its research prior to publication for export restrictions, with only a 1% applicability.)
Consider use of “Technology Assistance Agreements” [defined in the ITAR] for deemed exports instead of licenses.
Retain the current “use” technology understanding (that all six attributes must be present for “use” technology to be present)..
Consider bona fide full-time employee exemptions for deemed export access to technologies under certain conditions (like the ITAR).
Make BIS mass market encryption determinations publicly available.
Public Comment: Charles Brown, Special Asst. to the Provost at Georgia Tech
Remarks: Generally, what happens at Georgia Tech, and probably most universities, is that if you have potentially export controlled work, you assign U.S. students to do the work and exclude foreign nationals. As a result, we may be losing valuable talent and brilliant minds due to this type of management. History shows us in the past if we had excluded great minds from scientific research because they were foreign nationals and said they needed a license, progress as we know it would have suffered. We have no way of knowing the impact of excluding talent.
Public Comment: Jamie Louis Keith, Vice President and General Counsel, University of Florida
Remarks: There is an alarming trend documented by a federal administration project that our faculty members are spending more time on compliance and administrative task and less on fundamental research. We need to focus on NSDD189 and answer how we are focusing their time and work, versus focus on various classifications and export issues. Are we spending talent and resources where we should? The panel should consider the use of classification and border controls to potentially solve some of the deemed export issues. We should also be realistic and recognize that in the world we live in, a U.S. citizen can transfer information aboard just as well as a foreign national.
Public Comment: Dean Sutter, Assoc. Director of Infrastructure Packaging Research Center, Georgia Institute of Technology
Remarks: The Infrastructure Packaging Research Center represents 16 faculty members whose group is self sufficient and completely industry-funded. 90% of its funding comes from 60 member companies. Management of export control and deemed exports has become a primary issue at the Center. Our labs are multi-user environments where there is controlled and uncontrolled equipment, and foreign student use of materials requires constant monitoring, control and vigilance. For every research proposal we submit, we go through an exhaustive line item by line item process to determine if there are any export issues. Using back of the envelope calculations, if the 3,200 research engineers who use the Center use 16 hours per year on export control issues, at an average salary of $100,000/yr, that amounts to $4.8 million lost to export control. We are losing too much money on this issue; we need to redefine and fix the process. My staff works hard at the front end so that our programs fall outside the scope of export controls. Of the 240 cases they worked last year, they did not apply for any export licenses. Overall, we find the export process so complicated that our staff works hard to find their way around it instead of having to deal with it.
Public Comments: Catherine Robertson, Associate Director, High Technology Trade Policy, National Association of Manufacturers (speaking on behalf of the “Coalition for Security and Competitiveness”
Remarks: When industry looked at the deemed export process, it was not the quantity of licenses that caught our attention, but the process of simply determining whether a license is required. Our desire is to have a predictable and efficient system with which to work. Our second desire is for BIS to streamline the Commerce Control List; this issue has been raised with BIS. We would like to work with BIS to remove low risk items that do not pose a risk to national security. Third, we need to create some type of a license exception for intra-company transfers – this could be applied to universities as well as they stretch out across the globe. There is an incentive to do this within industry because proprietary information is important to companies and the information would have stringent controls as to what individuals could do with it on a global scale – assuming that the same technology control plan is in place at all of the global institutions given access to a given technology or piece of information. Finally, national security in general requires a strong industrial base, and in turn, the industrial base requires a strong research base from U.S. universities. The entire system must work together and none of the individual parts should be considered on a mutually exclusive basis.
Public Comments: Giovanna M. Conelli, Partner, Patton Boggs, LLP
Remarks: If you look back for a moment at national concerns and export laws, the laws have been concerned with three issues: national security, foreign policy and short supply. When you consider solutions, the Committee may want to consider the statutory frame work under which they are dealing because changes made have a domino effect for different communities, such as independent contractors working with the university, consultant, industry, or U.S government agencies. Looking at the regulation for deemed exports prior to 1994, there used to be a requirement for “knowledge of” or “direct intent” for an unauthorized transfer to a foreign end-user when an individual left this country with industrial technology and innovation. Also, consider that the export laws are actually “context-less.” It is the item or activity undertaken that creates the obligation under export laws. So as you consider how to change the deemed export system, please consider non-traditional impacts beyond the applicant (such as in a courtroom or in litigation) and how the regulation may impact or be interpreted in that environment as well.
Public Comments: John Childress, Director, Division of Sponsored Research, Vanderbilt University
Remarks: Nearly everything that was briefed by Mr. Brady of Virginia Tech applies to Vanderbilt as well. One of the primary reasons that Vanderbilt tries to avoid interfacing with the export regime is that it will take a prolonged period (possibly six months) to get the license. Six months in a researcher’s life or graduate student’s life – before they can even touch the equipment and then have possible restriction on individual pieces of equipment – is a significant amount of time. Most of Vanderbilt University’s research is biomedical. The National Science Advisory Board on Biosecurity recently issued draft guidelines for the purpose of informing the federal community on methods for dealing with this matter. Having just read these guidelines, there will be significant additions from this field to the Commerce Control List. In the future, you may see a lot more physicians and medical doctors at these presentations looking for answers to what is coming down the road.
Lab Site Visit:
DEAC members and BIS staff were invited by Georgia Tech to visit two on-campus labs. The first lab facility was researching digital imagery and communications and involved a majority of foreign graduate students. The second lab was a materials lab, again with a majority of foreign students.
Closed Session:
The DEAC also met in a closed session from 4:00 – 6:00 p.m.