Where Industry and Security Intersect
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The Deemed Export Advisory Committee (DEAC) met in open session on January 22, 2007, from 8:00 a.m.-12:00 p.m. and January 23 from 8:00-10:00 a.m. in the American Electronics Association’s (AeA) Conference Room, 5201 Great America Parkway, Suite 400, Santa Clara, CA. The Meeting was called to order on January 22 at 8:32 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 25 members of the public in attendance.
Deemed Export Advisory Committee Members Present:
Mr. Norm Augustine, Chairman
Dr. Albert Carnesale
The Honorable John Engler
Dr. Anthony A. Frank
General John A. Gordon (present January 22nd only)
Dr. Eva J. Pell
Dr. Ruth David, Co-Vice Chair
The Honorable Sean O’Keefe, Co-Vice Chair
(present January 23rd only)
Dr. James N. Siedow
Mr. Michael Splinter
Dr. William A. Wulf
Note: The text that appears below each speaker’s name is a summary of that individual’s remarks or statement.
Day One (January 22, 2007)
Chairman’s Opening Remarks:
Mr. Augustine spoke about the changes in the membership of the DEAC, including the resignation of Dr. Robert Gates (now the Secretary of Defense) and the appointment of Dr. Ruth David and Sean O’ Keefe as co-vice chairs. He spoke of the changes in the former bi-polar nature of the world and the impact of the global economy on the United States. Specifically, he mentioned the ease of transferring information that is new and still emerging, including the transfer of information within companies with multi-national headquarters. He spoke of a Booze Allen Hamilton study that found that a preponderance of research and development facilities developed by U.S. companies over the next three years will be developed in China and not in the United States. He reiterated that the Committee is cognizant of its national security functions, but recognizes that any “walls” must duly protect items and technologies that are worth protecting while letting in the “special people” that help create them. He welcomed the guidance and advice of all of the presenters at the meeting.
Designated Federal Official’s Opening Remarks:
Mr. Bernie Kritzer Director, Office of National Security and Technology Transfer Controls, Bureau of Industry and Security, U.S. Department of Commerce, (and the DEAC’s Designated Federal Official) thanked the AeA for making the facility available and all others in attendance. He restated the mission of the DEAC and discussed the basis of the deemed export rule.
Other DEAC Members’ Opening Remarks:
Dr. David said that the Committee is faced with a very formidable task, and that the gathering of information is of the utmost importance.
Dr. Pell said that her employer, Penn State, has enjoyed the huge participation of foreign graduate students and many have become friends for life, long after going home to their respective countries. She said that the 2006-07 school year was the first in several where there was in increase in foreign graduate students at Penn State, and that the university is trying to avoid the creation of a hostile environment for these students.
Mr. Splinter said industries are globalizing and that information on the creation of any one product could come from a number of sources inside and outside the United States. The DEAC needs to realize this is happening. The U.S. needs a level playing field, while still needing to protect the nation.
Dr. Siedow was quick to point out that there have been a lot of smart people who have thought about this in the past with no success and he hoped that this committee had better success.
SCHEDULED PRESENTERS:
Dr. Arthur Bienenstock, representing Stanford University:
Professor Bienenstock said that Stanford performs only “fundamental research” and does not accept any contracts or grants where there are restrictions on the publication of the results or limitations placed on their researchers. He said Stanford’s policies are based on National Security Decision Directive (NSDD) 189 which states, “no restrictions may be placed upon the conduct or reporting of federally-funded fundamental research that has not received national security classification, except as provided in applicable U.S. Statutes.” He commented on the three possible types of BIS controls on fundamental research: classified and proprietary materials; technical manuals not publicly available; and “use” controls. He went on to say that there are negative consequences to “use” controls and that professors should not be able to tell foreign national students from U.S. students in their assignments. If “use” controls must be in place once the student is on campus, they must look and feel seamless. The infrastructure would have to be readily identified up front. He also mentioned that Stanford University volunteered to be the baseline university for a visit by the Department of Commerce and the White House Office of Science and Technology Policy (OSTP) in April 2006. The site visit determined that none of Stanford’s research instrument required a license, but there was an initial disagreement about the status of one instrument in particular – which illustrates the difficulties universities face determining their licensing liabilities. He concluded by stating that it is his understanding that there is no statutory requirement for deemed export controls at universities, and even if they do exist, there should not be any restrictions on the conduct or reports resulting from fundamental research (per NSDD 189).
Recommendations:
DEAC should clarify whether statutory requirements exist for deemed export controls at universities.
If there are no statutory requirements, that fact should be made clear. Otherwise, seek a carve out for universities from the deemed export regulations.
Additionally, if there is no carve out, recommend that a Commerce web site be developed to ascertain the export control status of every instrument and technical manual likely to be found in a university lab.
There needs to be an improved visa mechanism for screening potential threats. Ensure relevant expertise at the embassy level.
Mr. Donald A. Weadon, Jr., Esq., representing Weadon and Associates
Mr. Weadon stated that deemed export controls have a disproportionate impact on small businesses and that foreign nationals have contributed to many significant innovations. Mr. Weadon made the following key points:
That small business has served as the engine of technological growth and innovation, but the deemed export regime threatens this engine through its complex structure, slow processing, and uneven enforcement.
That deemed export regulations lack a statutory foundation. None of the Wassenaar allies implement comparable controls.
That the DEAC follows several other blue ribbon panels investigating similar issues and that the deemed export regulations remain a problem.
That deemed export controls should help industry protect intellectual property rights, and that there are insufficient intelligence reports to back up claims of espionage taking place by foreign nationals. The goal should be to educate ethnic groups within the United States about technology leakage with the goal to stop improper transfers before they happen. The best enforcement comes from “tips,” not licensing.
Recommendations:
Create laws that give balance and support to fundamental research. Congress said no more unilateral controls in 1988.
There are no best practices oversights for Technology Control Plans, but there should be. Controlling equipment is a 1% solution and doomed to failure.
Educate the workers and engineers who have developed the technology on safeguarding their intellectual information. Teach this through increasing awareness, education, and interaction so that government controls can help educate industry in this process. Help stop the leaks of information; this is an issue of good business practices, and good government.
Speed up the technology review of licensing and help get quicker background checks for foreign nationals so that industry does not lose its competitive nature. Deemed export controls stifle research and that is a true national security threat. There needs to be a licensing system that responds in days and weeks, not months.
Mr. Steve Kott, representing Advanced Micro Devices
Mr. Kott spoke about keeping the licensing application moving through the interagency process and exercising more transparency in that process to see where the slowdowns occur. He said that in 2006, AMD submitted 50 deemed export license applications. 70% of them were returned approved in less than 90 days; another 20% were approved within 120 days; and 10% took longer than 120 days. AMD is concerned about its “need to keep the body warm,” when a foreign national is hired. 90 days is a long time to retain a hire (or prospect) without being able to put them on the job. He thought that Congress ought to review the licensing process for deemed export controls, but he did not know how it would react in the post 2001 era. Mr. Kott also stated that his company does research outside of the United States in Shanghai in the realm of software, but if it decided to expand this facility to other areas, it would be concerned about the number of export licenses they might require. He closed by explaining how AMD spends a significant amount of money to protect its intellectual property around the world – which is the company’s chief priority.
Recommendations:
Mr. Kott reiterated a statement made by Mr. Weadon that there are no laws to stop the leaks of information. He said he would like to see a licensing timeline of about 30 – 45 days.
Day Two
Mr. William B. Linscott, representing The Boeing Corporation
Boeing is growing in non-U.S. personnel. Most foreign national hires receive an export briefing on their first day on the job. Boeing always thinks about export requirements as they do their daily tasking. A lot of foreign nationals help build Boeing commercial airplanes, and therefore do not require a license to do their job. However, things may change as new composite materials are used to build them. The foreign nationals who work for Boeing wear badges that identify them as such, and this is not perceived negatively. Different badges can reflect different security classification level accesses, as well as other things.
Recommendations:
The DEAC could suggest that our government do country-by-country licensing, rather than person-by-person.
Validate individuals in the visa/arrival process through export licenses. This validation serves as a form of credentials as they move through the workforce.
Keep industry involved.
Regarding deemed exports, the DEAC should clarify the requirements, create efficiency in the process, recognize the global business needs, draw a necessary balance to protect national security concerns, take into consideration the role that foreign nationals play in the United States workforce, as well as the roles government and industry play.
Ms. Kathleen Gebeau, representing QUALCOMM Corporation
Qualcomm is located in San Diego and presently has over 11,000 employees. Of its employees, 43% are foreign nationals. QUALCOMM holds over 5,100 U.S. patents and patent applications, and more than 25,000 foreign applied and granted applications. Protecting the company’s intellectual property, in addition to export controlled technologies, is crucial to QUALCOMM, regardless of the recipient’s nationality. Of its graduate students hires and interns, over 90% become permanent residents and long term employees. QUALCOMM faces a number of license application delays which undermine its business operations and goals. Projects are negatively impacted when there is a lack of qualified eligible workers to staff the project due to license application review delays. This also threatens its competitiveness and advancement. In addition, it encourages outsourcing of engineering services outside of the United States.
Recommendations:
Follow the encryption example (for Internet SSL encryption) and eliminate the need for deemed export licenses by creating new license exceptions or expanding existing exceptions.
Improve the license application process and add resources for conducting background investigations.
Publish guidelines on the BIS web site for deemed export license supporting documentation requirements and/or information requested not specified in the EAR.
Mr. Larry Christensen, Vice-President, J.P. Morgan Chase Vastera, Inc.
The term “Fundamental Research” was never fully defined in scientific terms, and export controls are not mainstreamed. There are several different factors that our country faces today versus in 1994, when the deemed export rule was implemented. Today, there needs to be a better process to consider adverse information, review license applications faster, and maintain historical record keeping of using licensing applications. He explained the history of the deemed export rule in detail and provided his input on how to improve the process.
Recommendations:
That the DEAC succeed in finding multiple approaches to reducing the deemed export burden while maintaining the ability of the government in some way to vet foreign nationals.
That the DEAC should request information regarding the history of deemed license reviews to determine whether any ECCNs may be protected by restrictions contained in the EAR and applied by the employer rather than sending in a license application. This approach could be tied to review of the foreign national during the visa review process.
That if the DEAC suggests new policies or new clarification of existing rules, that it make suggestions that can be embodied in clear regulations that enable corporations and universities to establish accurate, repeatable, processes that will be compliant.
That if the DEAC suggests clarification of the “publicly available” treatment provided in the 1985 recommendations of the working group headed by the National Foundation or NSDD 189, it give examples on both sides of the export control line.
That as part of the DEAC’s work plan, it engages agencies other than Commerce, including the reviewing agencies such as Homeland Security (immigration review).
The day two open meeting concluded at 10:00 am.
The DEAC also met in a closed session on Tuesday, January 23, 2007, from 10:00 – 11:30 a.m. During the closed session, the Committee members discussed matters determined to be exempt from the provisions relating to public meetings found in the Sunshine Act.