In this issue of Global Trade Navigator, we are providing an overview regarding deemed export control requirements. For companies employing foreign nationals, understanding the intersection of immigration status and export control regulations is crucial. Such business collaboration fosters innovation and growth, but also brings regulatory challenges, particularly concerning deemed exports. This article explores the basis of U.S. deemed export rules, how these rules vary between the different regulations controlling dual-use and military-grade technologies and outlines basic steps businesses should take to ensure compliance.
What Are Deemed Exports?
To start, a "deemed export" refers to the release or transfer of controlled technology or source code to a foreign person within the U.S.. This is considered an export to the person's home country, even if the technology never leaves U.S. soil.
Both the Export Administration Regulations (EAR) and the International Traffic-in-Arms Regulations (ITAR) restrict deemed export transfers. The U.S. Department of Commerce, through the Bureau of Industry and Security (BIS), regulates the export of dual-use items—those with both commercial and military applications—under the EAR. Technologies such as advanced computing chips and AI models fall under this category. On the other hand, the U.S. Department of State, through the Directorate of Defense Trade Controls (DDTC), regulates defense-related articles and services under the ITAR. This includes technologies with direct military applications and technologies "specially designed" for military purposes.
Companies considering data transfers to foreign nationals should be familiar with both the EAR and ITAR and understand which set of regulations apply to the technologies or materials to be transferred. There are differing standards for deemed exports under each regulation, and differing license requirements depending on which agency is responsible for controlling the technologies in question.
Four Key Steps for Compliance
Export control regulations are rapidly changing and expanding to cover new technologies, such as artificial intelligence diffusion, semiconductor manufacturing and quantum computing. Export control regulations are also subject to rapid changing applications in today's geopolitical environment.
- Conduct Risk Assessments: Regularly assess the risk of deemed exports within your organization. This involves analyzing your workforce, technology, and international collaborations to identify potential compliance vulnerabilities.
- Implement a Compliance Program: Develop a robust export compliance program. This should include written policies, employee training, and regular audits to ensure adherence to regulations.
- Apply for Licenses: If a planned technology transfer implicates U.S. export controls, apply for the necessary export licenses in advance. This process can be complex and may require adjustments to project timeframes; companies maintaining controlled technologies should consider consulting with legal counsel as necessary.
- Monitor and Update: Continuously monitor changes in export control regulations and update your compliance program accordingly. Staying informed about regulatory updates is crucial to maintaining compliance.
Navigating the complexities of U.S. deemed export rules is essential for businesses dealing with advanced technologies. As technologies like artificial intelligence continue to evolve and regulatory export control regimes take shape, it is more critical than ever for businesses to understand the implications of these regulations and how it may impact business strategies and project plans. By understanding the regulations, classifying U.S. technology, and implementing a comprehensive compliance program, companies can develop a plan to mitigate risk and operate within legal boundaries.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
