BIS Advisory Opinion Offers Guidance on Deemed Export Scenarios

The Bureau of Industry and Security clarified rules surrounding two deemed export scenarios in a new advisory opinion issued in June and released publicly this week. The opinion said U.S.-based subsidiaries are allowed to release certain controlled technologies to their foreign parent companies’ employees -- when they are on temporary assignment in the U.S. -- if the American subsidiary already has an export license to ship the item to its parent company. BIS also said the U.S. subsidiary can use its export license to ship covered items to its parent company if the items were developed by employees on temporary assignment in the U.S.

The opinion offers some guidance for exporters subject to deemed export license requirements, which restricts U.S. parties from sharing certain controlled technology or software to people from certain foreign countries when both parties are on U.S. soil. The advisory opinion request was submitted by a U.S.-based business whose parent company is listed in Country Group A:5 of the Export Administration Regulations. All names were redacted by BIS.

BIS said the U.S. subsidiary had asked whether it needed to apply and receive a new license from the agency in order to share certain controlled technology with employees from its foreign parent company when those employees are on “temporary rotational assignment” in the U.S. BIS said the U.S. subsidiary doesn’t have to apply for a new license and can share the technology or software with the employee as long as they are a “permanent and regular employee” of the foreign parent company as defined under the EAR.

Those employees would have to be employed at the foreign parent company for at least one year. If they are a contract employee, they must be in a “long-term contractual relationship with the company where the individual works at the entity's facilities or at locations assigned by the entity,” must work “under the entity's direction and control such that the company must determine the individual's work schedule and duties,” must work “full time and exclusively for the entity” and must be subject to a “nondisclosure certification for the company that he or she will not disclose confidential information received as part of his or her work for the entity,” BIS said.

If that’s the case, “no additional deemed export license is required for these employees,” the agency said.

BIS added that the technology that’s being shared with the foreign parent company’s employee also must be “within the scope” of the U.S. subsidiary’s existing license. Any new technology or software not authorized by the existing BIS license would need a new license or other authorization, the agency said.

As part of its advisory opinion request, the U.S. subsidiary also asked BIS whether it needed to apply for a new export license before shipping technology or software back to its parent company if the item was created by the foreign employee while on assignment in the U.S. BIS said no new license is needed as long as the newly created technology or software falls within the scope of the U.S. subsidiary’s existing license. Any “new ‘technology’ or ‘software’ created by” the foreign employee that isn't authorized by the “existing BIS license would require a new export license or other authorization from BIS.”

The agency also noted that software and technology that originates in the country of the parent company and that was originally imported into the U.S. for use by its subsidiary's employees can be reexported back to the foreign country under License Exception TMP (temporary exports, reexports and in-country transfers). The item is eligible for that exception “provided it was not altered, enhanced, or otherwise changed while in the United States,” BIS said.