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Home > Top Story Archive > August 7, 2008

Top Story

The following story is from the August 7 issue of International Trade Reporter Current Reports:

Export Controls

BIS Working to Finalize Procedures
To Enhance Intra-Company Transfers

The Commerce Department's Bureau of Industry and Security (BIS) will work within the interagency process over the next several months to finalize procedures to facilitate intra-company transfers in ways that are efficient, secure, and account for how cutting-edge research and development take place, Mario Mancuso, undersecretary of commerce for industry and security, said July 30.

Mancuso, who spoke at a Washington International Trade Association event, said that BIS will continue to work with stakeholders and interagency colleagues to implement the totality of the dual-use directive signed by President Bush in January.

In January, Bush issued a series of directives aimed at streamlining the U.S. system of controlling exports of high-technology products to Russia, China, and other countries (25 ITR 118, 1/24/08), (25 ITR 146, 1/31/08).

Over the next six months, BIS hopes to make "meaningful progress" on a number of important regulatory issues, including the intra-company transfer license exception, deemed exports, encryption, and foreign availability regulations. Mancuso said. Under the intra-company transfer license exception proposal, companies would be able to transfer certain controlled high-technology products to their foreign affiliates without obtaining individual export licences from the U.S. government.

Deemed Exports

With respect to intra-company transfers, BIS recognizes how globalization has fundamentally altered the nature of the value chain for many technology companies, he said. Thus, over the next several months, BIS will work within the interagency process to finalize procedures to facilitate these transfers in ways that are efficient and secure and account for how cutting edge research and development takes place, Mancuso said.

On deemed exports, BIS benefitted greatly from the report of the deemed export advisory committee submitted last December to Commerce Secretary Carlos Gutierrez, Mancuso continued. "Deemed exports" refer to transfers of controlled information and technical data to non-citizens on U.S. soil.

BIS has formed an emerging technologies technical advisory committee, which will consist of leading researchers from leading institutions, Mancuso said. The committee will help BIS fashion an appropriate deemed export policy, he said, indicating that the members of the committee are expected to be announced next month. The inaugural meeting of the committee is expected to take place in the early fall, Mancuso said.

VEU Logistical Issues

Under questioning, Mancuso noted that BIS announced China's eligibility for the validated end-user (VEU) program in June 2007 and announced five VEU companies in October of that year (24 ITR 1504, 10/25/07). The VEU program, initially put in place for China but expanded for India, permits sales of certain technology to prescreened civilian entities without an individual export license.

"We wanted to announce a limited number of companies because we wanted to see how it worked out in practice," he said. "Our assessment thus far is that VEU works."

There are some logistical issues BIS is working on with China, he remarked. "We just want to make sure that ... all of the logistics issues ... are fully taken care of [before announcing new companies]... because we recognize that the politics are complex," Mancuso said.

Mancuso said that the issues are confidential but are not related to BIS's ability to conduct on-site visits in China. "There are some details we're working on but they don't relate to our legal authority [to conduct inspections in China]," he said.

BIS has already received applications from companies in India for the VEU program, Mancuso noted. The "handful" of applicants are undergoing a comprehensive interagency review, he said.

Enforcement Authorities

BIS will continue to focus on the areas of highest enforcement concern, Mancuso said, commenting that the challenge of Iran is of "singular importance."

The challenge of Iran exemplifies why BIS officials need enhanced enforcement authority and why the Bush administration strongly supports the reauthorization of the Export Administration Act (EAA), Mancuso said. "[BIS agents] need updated tools to combat proliferation in an era of globalization," he said. A reauthorized EAA would enable domestic and international investigations and enforcement actions to proceed more quickly and efficiently, he commented.

Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate Banking Committee, has sponsored legislation (S. 2000) that would reauthorize the EAA, which expired in 2001.

Under questioning, Mancuso noted that Rep. Brad Sherman (D-Calif.) is working on legislation that incorporates certain aspects of the Dodd bill, specifically enforcement aspects. "We support those enforcement authorities. We actually think doing it under the rubric of a reauthorized EAA is optimal," he said.

"Our country will be better served over the long-term by having those authorities for our enforcement agents," he said.

By Rossella Brevetti

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