Regulations & Procedures Technical Advisory Committee

**March 4, 2003 Meeting Minutes**

Committee members in attendance: Jim Wyatt, H. Earl Adams, Anne Marie
Banner, Kathleen Gebeau, Susan Kargel, Thomas Ladd, Terence Murphy, Vera
Murray, Vickey Roberts, Gina Roberts, Joseph Sepesy, Michael Stamets,
Catherine Thornberry, John Tier, Sandra Vincent, Julie Zack.

# Open Session

# Introductions and request for public comments/presentation of papers

-   No public comments were made and no papers were presented.

# Pending regulations update - Sharron Cook

-   The regulation to implement Spring '02 Wassenaar changes will be
    published on March 5.

-   The regulation to implement 1999 MTCR changes is undergoing final
    review with BIS General Counsel. The regulations include ECCN
    changes (13 new ECCNs and 8 ECCNs deleted) and revisions to Country
    Group A:2 (Czech Republic, South Korea, Poland, Turkey and Ukraine
    have been added).

> (NOTE: regulation was published on April 2, 2003)

-   A regulation relating to explosive detection equipment (2A983) is in
    final review. (NOTE: regulation was published on April 3, 2003)

-   A new regulation imposing licensing requirements on Specially
    Designated Global Terrorists has been drafted. The license policy
    will be a presumption of denial.

-   Regulation changes relating to the licensing policy for parties
    sanctioned under other regulations (e.g. Dept of State Debarred
    Parties) are being drafted. The reg will describe a policy of
    "presumption of denial" for such parties.

-   Questions were raised regarding a number of proposed and pending
    regulation changes discussed at prior meetings, including:

    -   License exception APR -- reg currently on the back burner; BIS
        still intends to publish previously described changes

    -   License exception TSR -- at the present time there are no
        interagency discussions on proposed changes in the MTOP limit
        for TSR

    -   De Minimus Reg -- interagency agreement could not be reached;
        BIS intends to go to OMB for resolution

# Encryption Regulation Recommendations - Norm LaCroix

-   Norm reviewed current activity, including:

    -   Classification review cycle time currently 57 days

    -   Most common items reviewed are short range wireless, network &
        security management products, and networking products (i.e. VPN,
        firewalls, routers)

    -   Over 80% of products are classified as either retail or mass
        market

    -   Licensing activity has increased 40%

    -   Approximately 200 companies are submitting reports

-   Future changes in encryption regulations were discussed in terms of
    two phases. Near term revisions will consist of "housekeeping types
    of changes" to clarify a number of issues including personal use,
    the treatment of preloaded and bundled software, and de minimus
    eligibility for publicly available source code implemented in object
    code. Longer-term changes would include attempts to prune the
    encryption controls decision tree, further reduce cycle times,
    consider moving certain encryption items to EAR99, and look for ways
    to reduce review and notification requirements.

# Update on Wassenaar Proposals - Bernie Kritzer & Jim Thompson

-   The next experts' meeting is in April. The US has approximately 20
    proposals. The other Wassenaar members have another 20 proposals in
    total.

-   US proposals include a proposal to create an AT control list and
    proposed controls on certain aircraft simulators and UAVs.

# Deemed Export Licensing Discussion - Bernie Kritzer

-   Bernie provided current licensing stats, including

    -   Current license cycle time is approximately 60 days

    -   85% of licenses are obtained by 25 companies

    -   80% of all cases are for Chinese (60%) and Russian (20%)
        nationals

    -   Over 80% of licenses are for cat 3,4,5 and 9 technology

    -   25 to 30 % of cases are renewals (up from 15% in '02)

    -   Virtually all licenses are for foreign nationals graduating from
        US universities as opposed to foreign workers moving to the US

-   Jim Jochum sent a BIS deemed export license conditions proposal to
    other agencies for review. Bernie expects to hear back from other
    agencies within a week or so. Bernie advised that he would inform
    RPTAC of the responses received from other agencies.

-   Longer-range plans include a review of licensing requirements and
    proposed alternatives, such as license exception "NDA". Bernie
    requested another copy of the original RPTAC "NDA" proposal.

# Discussion of AES/SED Regulations and Issues - Harvey Monk

-   Harvey provided current AES stats, including:

    -   Currently 87% of exports filed via AES

    -   150,000 paper SEDs per month are still being submitted

    -   5,000 companies currently using AES

-   14 comments were received on the proposed AES regulation. Current
    goal is to publish a final rule by June with a 90-day implementation
    period.

-   Customs is proposing elimination of Option 4, elimination of \$2500
    filing exemption, and elimination of Canada filing exemption.

-   Customs is proposing a training and certification process for AES
    filers.

-   There was discussion of liability issues between USPPI and AES/SED
    filers. Harvey was asked about the possibility of revising the
    system to allow multiple parties to enter data for the same record
    (i.e. USPPI enter certain data and the carrier/forwarder enter
    certain data). As discussed at previous meetings Harvey advised that
    there were no funds available for such changes.